By Wallace Witkowski, MarketWatch SAN FRANCISCO (MarketWatch) -- Policy makers in Europe will be under investors' microscopes in the coming week after the threat of a Greek debt default helped send the Dow average to its worst weekly drop in nearly three years. Stocks, along with precious metals and other commodities, suffered steep losses in the past week. Investors fled to perceived safe havens such as cash and Treasurys as more European banks received downgrades and European leaders appeared at odds over how to resolve the region's debt crisis. "No one wants to get stuck with the check but it's going to be Germany, along with France, while the other countries duck out to the bathroom," said Karl Mills, chief investment officer at Jurika, Mills & Keifer. The Dow Jones Industrial Average (DJI) declined 6.4% for its worst one-week loss since October 2008. The Nasdaq Composite (RIXF) lost 5.3%. Stock losses started gaining momentum on Wednesday after the Fed announced it would trade out about $400 billion in short-term Treasurys for ones with longer-term maturities. The bond-exchange program termed "Operation Twist" is aimed at lowering long-term consumer borrowing costs. But analysts noted that it's more limited than some of the Fed's past stimulus programs and may only help the lagging U.S. economy at the margins. Also, ratings agencies downgraded a number of Italian, French and Greek banks, further ramping up pressure on the European Union. Investors scrambled as gold and other metal prices sunk along with stocks and commodities, propping up the U.S. dollar and Treasurys. Political dysfunction -- more so in the European Union than the United States -- was the main cause for investors retrenching last week, Mills said. "We are definitely going through a recession of confidence, and confidence is the key to growth," Mills said. "What growth we have doesn't support our debt levels and doesn't support job growth." Bill Stone, chief investment strategist at PNC Asset Management Group, said he believes a Greek default is a foregone conclusion but E.U. officials need to hammer out how much of a haircut banks holding sovereign bonds can take. "Part of this tells me the core of Europe wants a certain amount of crisis to put pressure on the periphery nations, but you can't let it go too far or it affects the core," Stone said. "They've got to get to the middle of the road where they extract austerity measures from the periphery in return for a back stop." For market catalysts in the U.S., Stone said Thursday will be a key data day with a revision to second-quarter GDP figures released. Bold policy actions Investors need to see bold policy actions to resolve the global debt crisis coming out of Europe to restore confidence, said John Canally, an investment strategist at LPL Financial. "Investors are getting some of these things behind the scenes, but they're not seeing the big, bold coordinated efforts that could permanently and confidently resolve the issue," said Canally. On Thursday, finance ministers and central bank governors of the Group of 20 major economies pledged "to preserve the stability of banking systems and financial markets as required." The next day, Greek Finance Minister Evangelos Venizelos reportedly told fellow lawmakers that bondholders in Greek debt could see up to a 50% haircut in an orderly default. Also on Friday, Antonio Borges, head of the International Monetary Fund's European division, said a huge increase in the European Financial Stabilization Fund will not solve the region's problems. Those comments followed IMF chief Christine Lagarde's argument that markets were not taking into account Europe's progress in lowering their debt burden. A key catalyst in the coming week will remain weekly jobs numbers. With consumer spending the largest driver for the U.S. economy, confidence probably will not return to the market until job indicators improve, said Stephen Hammers, portfolio manager of the Compass EMP Alternative Strategies Fund. "We've got to see better employment numbers, we just have to," he said. Other than Europe, Canally said that any positive corporate earnings preannouncements in the coming week could help undervalued stocks, since markets are already pricing in a deep recession. The portion of negative warnings from companies is roughly in line with past quarters. The percentage of S&P 500 (SPX) constituents issuing negative guidance is 66%, outpacing the 34% that issued positive outlooks, according to John Butters, senior earnings analyst for FactSet Research. Earnings in the S&P 500 are expected to increase 13.1% in the third quarter. Companies on deck to report quarterly results in the coming week include Walgreen Co. (WAG), Accenture PLC (ACN), Micron Technology Inc. (MU) and Jabil Circuit Inc. (JBL).