NEW YORK - U.S. stocks fell on Friday as uncertainty about how the government will help clean up bank balance sheets tempered earlier optimism and hurt financial shares, while large-cap techs weighed.

Citigroup's chairman told Reuters late on Thursday the bank did not need any more government aid, sending its stock up 3 percent at midday on Friday. But long-standing worries about the mechanics of the toxic asset clean-up resurfaced, sending the broad KBW bank index <.BKX> down 5.4 percent.

I really don't think you're going to see a true floor in this market until we get a comprehensive plan on the finance sector, said Peter Jankovskis, director of research at OakBrook Investments LLC in Lisle, Illinois.

Officials have repeatedly said getting banks stabilized is crucial to putting the economy on the road to recovery. Hopes that some stabilization was returning to the banking system helped stocks rise for three straight days.

The Dow Jones industrial average <.DJI> declined 48.43 points, or 0.68 percent, to 7,121.63. The Standard & Poor's 500 Index <.SPX> dropped 6.75 points, or 0.90 percent, to 743.99. The Nasdaq Composite Index <.IXIC> fell 15.83 points, or 1.11 percent, to 1,410.27.

The S&P financial index <.GSPF> fell 3 percent. Bank of America shares slipped 0.7 percent to $5.81 and Wells Fargo & Co shares shed 5.5 percent to $13.18.

But Citigroup's stock was up 3 percent at $1.72, although it was off from earlier gains that took it up 13 percent to a session high at $1.89. JPMorgan Chase & Co shares were flat at $23.20.

Nasdaq was dragged lower by technology bellwethers, including Microsoft , down 4.1 percent at $16.31, and BlackBerry maker Research in Motion , down 5.2 percent at $39.30.

In contrast, Merck shares rose 7.8 percent to $25.90 after Sanford C. Bernstein upgraded the drug maker's stock to outperform.

(Additional reporting by Ellis Mnyandu; Editing by Jan Paschal)