Stocks fell on Friday, as long-standing worries about the health of the banking system resurfaced and a brokerage said American Express may post yearly losses and cut its dividend.

General Electric also weighed down the market, as brokers lowered their 2009 profit forecasts for the company.

Financial shares were hit after investors on Thursday applied for less than 2.5 percent of the $200 billion the Federal Reserve pledged to loan through its long-awaited program to revive consumer and small business lending, known as the Term Asset-Backed Securities Loan Facility (TALF) .

Shares of JPMorgan , down 5.1 percent to $23.67, were a top drag on the Dow. Bank of America shares fell more than 10 percent to $6.19. Both the KBW Bank index <.BKX> and the S&P financial index <.GSPF> dropped more than 5 percent.

TALF got off to a slow start, said Jim Paulson, adding that a bill passed by the U.S. House of Representatives on Thursday to recoup bonuses paid to American International Group dampened investor interest.

Who's going to want to get involved in anything that the public money is involved in, if later on they can say anyone who got (that money) has to do a, b and c now.

American Express Co shares tumbled 6.6 percent to $12.20 after analysts at Friedman, Billings, Ramsey said the company may post a loss in 2009 and 2010, hurt by growing unemployment levels and rising credit card defaults. They also said American Express may slash its dividend.

And GE shares fell more than 7 percent to $9.35 a day after the company's briefing on its financing unit, the U.S. conglomerate's weakest link.

The Dow Jones industrial average <.DJI> dropped 108.01 points, or 1.46 percent, to 7,292.79. The Standard & Poor's 500 Index <.SPX> fell 15.56 points, or 1.98 percent, to 768.48. The Nasdaq Composite Index <.IXIC> lost 31.51 points, or 2.12 percent, to 1,451.97.

Notwithstanding this session's drop, the benchmark S&P 500 was on track for its best 2-week run-up since 1974, when it rose 15.95 percent.

One of the few bright spots of the day was Johnson & Johnson , up 2.7 percent to $51.42 after an anticoagulant drug from J&J and Bayer AG was backed by a U.S. advisory panel on Thursday, despite concerns over possible side effects.

Friday marked the quarterly expiration and settlement of four different March equity futures and options contracts -- a convergence known as quadruple witching, which can make trading volatile.

(Additional reporting by Leah Schnurr, Editing by Chizu Nomiyama)

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