The Dow Jones Industrial Average fell 1.40 percent over the course of the week to close at 12,479.73, a reversal after it rose the past two weeks.

The broader S&P 500 dropped 2.06 percent to end the week at 1,316.14, while the tech-heavy Nasdaq Composite shed 2.45 percent to 2,789.80, despite being lifted on Friday by a stellar earnings report from Google.

Fears that the Greek debt crisis was spreading to Italy stirred anxiety in the first part of the week while by Friday all eyes were on talks between Democrats and Republicans in Washington.

The White House and the US Treasury say Congress must raise the US federal government's debt ceiling by August 2 or risk pushing the United States into default, with potentially disastrous effects on financial markets.

But deep disagreements over tax increases and spending cuts have led to an impasse despite weeks of talks.

"The focus this week has been almost entirely first on Greece, then on the United States," said Hugh Johnson, chairman and chief investment officer of Hugh Johnson Advisors.

"What happens next week will turn almost entirely, at least the first part of the week, on whether or not the president and the Congress agree to a resolution of the debt limit crisis."

If Washington politicians manage to avert financial calamity, Wall Street will turn its attention to a traditional pastime -- earnings season.

Hundreds of companies are set to report their second-quarter earnings, with Tuesday an especially busy day as some of the biggest names in banking, technology and consumer goods announce their results.

Earnings reports from Bank of America, Goldman Sachs and Wells Fargo due Tuesday will reflect the health of the US banking sector, after Citigroup and JPMorgan Chase beat analysts' expectations this week.

Tech giants Apple and Yahoo! report results on Tuesday as well, along with Coca-Cola and Johnson & Johnson.

Other major corporations reporting their results next week include Intel and American Express on Wednesday; Morgan Stanley and Microsoft on Thursday; and General Electric on Friday.

The economic calendar will be fairly light, with the long-distressed housing market in focus. Housing starts and building permits numbers are due Tuesday, followed Wednesday by sales of previously owned homes.

"Next week will be about earnings. We'll get 100 companies of the S&P 500," said Gina Martin, equity strategist at Wells Fargo Securities.

"Quite frankly, I think earnings will be a welcome reprieve from all the macro news that we've contended with through the past couple of months."

Copyright AFP (Agence France-Presse), 2011