U.S. stocks suffer worst week in more than one year

U.S. stocks suffered its worst week in more than a year as Republican and Democratic lawmakers continued to bicker over how to resolve the debt crisis, eroding investor confidence.

U.S. stocks fell five straight days, driving the Standard & Poor’s 500 Index to a decline of 3.9 percent – its biggest weekly drop since June 2010. The Dow fell 4.2 percent for the week. In all, Washington’s inability to reach a compromise on raising the debt ceiling cost investors $700 billion in market capitalization, according to financial data company Wilshire.

“People are just crossing their fingers that these morons in Congress will get a deal done by Monday,” Dave Rovelli, managing director of US equity trading at Canaccord Adams, told CNNMoney.

Although investors remain mostly positive that Congress will reach a deal, short-term Treasuries saw moderate selling on Friday, as investors pulled money out of securities that would likely be the first affected by a government default.

Gold futures for August delivery jumped $14.90 or 0.9 percent, to $1628.30 an ounce. Earlier gold, a go-to asset in tough economic times, hit an intraday record of $1,634.90 an ounce.

Shares of drugmaker Merck fell 2 percent after the company announced it plans to reduce its workforce by 13 percent by 2015. It was one of many blue chip stocks that dropped, including Hewlett Packard.

All 10 groups in the S&P 500 tumbled at least 2.1 percent, Bloomberg reports, including UPS, which dropped 6.7 percent; 3M, which lost 8.6 percent and Sprint Nextell, which plunged 18 percent to $4.23.

“Markets don’t like uncertainty, and that’s been the key word,” John Cannally, an investment strategist at LPL Financial Corp, told Bloomberg News. “The market’s comfortable with the idea that there’s no default, but what the market doesn’t know is the path to get there."

After markets closed Friday, the House passed speaker John Boehner’s debt ceiling plan 218 to 210. But the Senate immediately rejected it. The S&P has already placed the U.S. AAA rating on “CreditWatch,” saying there’s a 50 percent chance it will cut the rating within the next 90 days even if Congress reaches an agreement by the Aug. 2 deadline.