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NEW YORK (Reuters) - Stocks fell on Friday on low volume to end their third negative week in four on lingering concern over whether the world's central banks will soon start to trim their stimulus programs.
Uncertainty about the longevity of loose monetary policy around the world has caused volatility to jump lately. Nerves were frayed some more earlier in the week when the Bank of Japan decided to hold policy steady.
Attention is now focused on the Federal Reserve's policy-setting meeting and press conference next week. Chairman Ben Bernanke's congressional statement on May 22 raised concerns that the Fed could soon begin to cool its stimulus efforts.
"Bernanke is going to try to soothe the market and maintain his position he's not tightening soon," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
"The market wants to see the timetable for the tapering, and I doubt they're going to get that."
Bernanke "has become the market whisperer," she said. "He knows tapering is necessary, but he's learning the market isn't going to wait for the Fed to act."
The unwinding of trades linked to central bank support has recently strengthened correlations between asset classes.
The 200-day correlation between the S&P 500 and the Japanese currency stands at minus 0.91, near its strongest inverse correlation in more than four years. Bets against the yen, cemented on expectations that Tokyo will keep accommodative monetary policy in place, have been used to finance long positions in Wall Street equities.
The U.S. dollar extended losses against the yen on Friday to fall more than 3 percent for the week, its largest such drop since July 2009.
The Dow Jones industrial average .DJI fell 105.90 points or 0.70 percent, to close at 15,070.18. The S&P 500 .SPX slipped 9.63 points or 0.59 percent, to finish at 1,626.73. The Nasdaq Composite .IXIC dropped 21.81 points or 0.63 percent, to end at 3,423.56.
For the week, the Dow fell 1.2 percent, the S&P 500 slid 1 percent and the Nasdaq lost 1.3 percent.
The Dow swung 161 points throughout Friday's session. Its 14-day intraday average range is now 193 points - the highest since December 2011.
The CBOE Volatility Index .VIX, or VIX, rose 4.5 percent to end Friday's session at 17.15. The VIX is Wall Street's favorite measure of investor anxiety.
Analysts say the market's volatility will continue as traders try to anticipate the Fed's next move.
Financial stocks led the market's decline on Friday. The S&P financial sector index .SPSY has dropped more than 3.9 percent from a 4-1/2 year intraday high hit last month.
Dow component American Express (AXP.N) fell 3 percent to $72.97 and led financial shares lower. The stock extended its weekly loss to 6.5 percent.
DuPont (DD.N) ranked as the Dow's second-biggest percentage decliner, falling 2.2 percent to $52.68 after a brokerage cut its price target on the stock following the company's second-quarter earnings pre announcement on Thursday.
JPMorgan Chase & Co (JPM.N) shares slid 1.9 percent to $53.13 after the bank said its private equity unit, One Equity Partners, will become independent and raise future funds from an external group of partners.
Decliners beat advancers on the New York Stock Exchange by a ratio of about 8 to 7. On the Nasdaq, about 18 issues fell for every seven that rose.
About 5.5 billion shares exchanged hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of nearly 6.39 billion.
In contrast with the market's downturn, shares of Groupon (GRPN.O) surged 11.5 percent to $7.65 after an analyst's upgrade increased optimism about a recent strategy shift by the world's largest daily deal company.
On the economic front, Thomson Reuters/University of Michigan's preliminary index on consumer sentiment fell to 82.7 in June after touching a near six-year high of 84.5 in May. June's reading was the second highest in the last eight months, suggesting Americans were far from gloomy about their long-term economic prospects.
The overall U.S. producer price index rose more than expected in May as gasoline prices rebounded, the Labor Department reported. But underlying inflation pressures remained muted, which could bolster the argument against an early pullback in the Federal Reserve's stimulus program.
Reporting by Rodrigo Campos, Angela Moon and Leah Schnurr; Editing by Jan Paschal