By Angela Moon and Alison Griswold
NEW YORK (Reuters) - U.S. stocks fell on Friday as investors sold some shares to book profits a day after the S&P 500 recorded its second-best session of the year and disappointing data showed a decline in consumer sentiment.
On Thursday, the S&P 500 posted its biggest gain since January 2 as stronger-than-expected economic data helped reassure investors who had been anxious about an expected slowdown in the Federal Reserve's economic stimulus. Thursday's rally followed a three-day decline.
In Friday's session, the Fed and other central banks were back in focus as investors worried about how soon the stimulus programs will be trimmed.
Financial stocks led the market's decline after an index of U.S. consumer sentiment retreated in June from nearly a six-year high in May, according to data from Thomson Reuters/University of Michigan. The S&P financial sector index slid 0.8 percent.
The market is "giving back some of those gains from yesterday, which I think really caught people by surprise ... and I certainly think the economic news wasn't bullish," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
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"We go through these ups and downs," he said. "I would still say this market is certainly driven by central banker thoughts and currency markets like the Japanese yen."
The dollar extended losses against the yen on Friday, putting it on course for its worst week since July 2009 as volatile stock markets had investors unwinding bets against the yen.
"Carry trades are the big deal," Saluzzi said. "It hasn't been a profitable trade over the last month, although for a while, that was considered the place to be. But now it's sort of imploding."
Carry trades refer to the practice of borrowing money cheaply to invest in higher-yielding assets and make a profit.
The Dow Jones industrial average was down 81.67 points, or 0.54 percent, at 15,094.41. The Standard & Poor's 500 Index was down 6.52 points, or 0.40 percent, at 1,629.84. The Nasdaq Composite Index was down 17.06 points, or 0.50 percent, at 3,428.31.
DuPont was the Dow's biggest percentage decliner. Its stock fell 2.4 percent to $52.59 after a brokerage cut its price target on the blue-chip stock following the company's second-quarter pre-announcement on Thursday.
JPMorgan Chase & Co shares fell 1.4 percent to $53.43 after the company said its private equity unit, One Equity Partners, will become independent from the bank and raise future funds from an external group of partners. The stock was the Dow's fourth-largest percentage decliner.
Bank of America shares fell 0.7 percent to $13.12 and ranked among the Dow's 10 worst performers.
The SPDR Financial ETF XLF also lost 0.8 percent.
With the day's decline, the three major U.S. stock indexes were on track to end the week down about 1 percent.
Jitters over the longevity of monetary policy around the world has roiled markets recently. Nerves were stretched further this week when the Bank of Japan held policy steady.
The prospect that the accommodative stance of the Fed and other central banks could be pulled back sooner than expected has prompted traders to rethink bets that were built around that support.
Attention is now focused on the Fed's policy-setting meeting next week after Chairman Ben Bernanke's comments on May 22 raised concerns that the Fed could cool its stimulus efforts in the near term.
Faring better than the overall market, utilities were the S&P 500's top gainers. The S&P utilities sector index was up 0.4 percent.
Advancers narrowly beat decliners on the New York Stock Exchange by 1,472 to 1,471 at midday.
In contrast with the market's downturn, shares of Groupon shot up 12.3 percent to $7.71 after Deutsche Bank raised its rating to "buy" from "hold", according to Benzinga.com.
(Editing by Jan Paschal)