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[NEW YORK] Wall Street stocks endured a bruising week spurred by weak bank earnings, bad US retail sales data and a shock Swiss central bank decision to strengthen the franc.
US markets mustered solid gains on Friday to close on a high note and snap a five-day losing streak. But the end-of-the-week spurt could not compensate for losses suffered earlier in the week.
The Dow Jones Industrial Average dropped 225.80 points (1.27 per cent) to 17,511.57. The broad-based S&P 500 shed 25.39 (1.24 per cent) at 2,019.42, while the tech-rich Nasdaq Composite Index fell 69.69 (1.48 per cent) to 4,634.38.
"You had a plethora of negative catalysts that added to the kind of volatility we saw this week," said Art Hogan, chief market strategist at Wunderlich Securities.
At the top of the list was a wave of disappointing earnings from JPMorgan Chase, Bank of America and Citigroup.
Earnings misses by all three banking giants prompted a sell-off in financials that extended to the broader market on Wednesday and Thursday.
The weak results were due to high litigation costs and poor trading returns. Analysts also expressed worry that a delay in the US Federal Reserve's plan to raise interest rates could spell more pain down the road. Rate hikes are considered a net positive for large banks.
"The banks are definitely disappointing," said Tom Cahill, portfolio strategist at Ventura Wealth Management.
"That was one of the leading groups and one that people were looking towards to be strong this year, and this is starting to look less credible." The poor bank earnings came in parallel with a surprisingly weak US retail sales report, which showed a decline of 0.9 per cent in December, a pivotal month for stores given the holiday shopping season.
The figures included a drop in 6.5 per cent in gasoline sales due to lower prices at the pump.
But several other key categories also saw declines, despite the boost to consumers from low gasoline prices. Sales dropped in miscellaneous and general merchandise stores, clothing stores and sporting goods, hobby, book and music stores.
Investors were also rattled by weakness in commodities markets. Oil and copper prices both dipped to fresh multi-year lows at mid-week.
Both commodities rallied somewhat in subsequent days, but the continued weakness is worrisome given that both oil and copper are viewed as proxies for global growth.
The week's biggest shock development was the Swiss National Bank's decision Thursday to lift the ceiling on the franc against the euro after defending the level for more than three years.
The Swiss currency immediately gained nearly 30 per cent against the euro, before stabilising at about 15 per cent higher than Wednesday's rate.
The decision also prompted a fresh sell-off of the euro, which briefly plummeted below US$1.15 for the first time since 2003 before recovering somewhat.
The Swiss move pummeled some forex trading firms on the wrong side of the trade. Analysts predicted it could also spur policy shifts by other central banks, as well as more financial market turbulence in general.
"Volatility has been on the rise since the beginning of the year and the SNB's announcement adds to the growing list of developments that could trigger greater volatility in the financial markets, like the ECB rate decision and Greek elections in the first quarter of the year," said Kathy Lien, managing director at BK Asset Management.
Central bank activity will be at the top of next week's agenda, with the European Central Bank set for an eagerly-anticipated policy meeting January 22 that is increasingly expected to result in a bond-buying stimulus programme.
The ECB meeting comes ahead of a closely-watched snap general election in Greece on January 25.
The election has raised concerns that a victory by the leftist Syriza party will force Greece to renegotiate its bailout with international lenders.
The week's other big draw will be a throng of earnings reports. The list of companies reporting includes IBM, General Electric, McDonald's and United Continental.