U.S. stocks fell on Friday as investors booked profits following a recent rapid surge, while the energy sector dropped along with the price of oil.

With developments out of Washington increasingly setting the market's direction, U.S. President Barack Obama will grill top bankers on Friday about the economy and their businesses a day after the administration unveiled plans to rewrite rules for the financial sector.

Bank shares fell, with Bank of America off 1.5 percent to $7.47 and JPMorgan Chase & Co down 2.6 percent at $28.35.

Exxon Mobil and Chevron were among the Dow's top drags as U.S. crude futures fell below $52 a barrel amid economic concerns and profit taking. Exxon was down 2.1 percent at $69.75 and Chevron gave up 1.9 percent at $68.87.

After the significant rallies, you will see these types of pullbacks, said David Sowerby, market strategist for Loomis Sayles in Detroit.

There remains significant macro uncertainty on consumer spending although the micro news has gotten marginally better.

The Dow Jones industrial average <.DJI> fell 129.59 points, or 1.64 percent, to 7,794.97. The Standard & Poor's 500 Index <.SPX> lost 13.60 points, or 1.63 percent, to 819.26. The Nasdaq Composite Index <.IXIC> was down 28.27 points, or 1.78 percent, at 1,558.73.

Heading into today's session, the S&P 500 was at its most overbought position since May 2008, according to its 50-day relative strength index.

Stocks had rallied on increasing optimism that the worst of the current downturn was over, and on comments from some major banks that they were profitable at the start of the year.

Analysts said that while recent data signals the economy is starting to show signs of life, the numbers remain gloomy, underscoring the headwinds still facing a recovery.

Every portfolio manager is embracing this but uttering to themselves, 'trust but verify', said Sowerby.

The recent rally has taken the broad S&P 500 index up more than 20 percent since it hit a 12-year low on March 9, although it is off nearly 10 percent for the year so far.

Among Friday's economic data, consumers' mood brightened a bit in March on improved confidence in government policy but overall sentiment was mired near record lows.

Gains on Thursday had helped push the Nasdaq back into positive territory year-to-date but a decline in big-cap technology shares pulled the index back under on Friday. Apple slipped 2.3 percent to $107.36 and Microsoft lost 3.5 percent to $18.17.

Obama is set to meet with leaders of the biggest U.S. banks at the White House later in the day. Officials said about 15 CEOs were expected to attend, including chief executives from JPMorgan, Goldman Sachs and Citigroup .

General Motors was a bright spot, with its shares jumping 11.1 percent to $3.78 the day after Obama said a plan to help the struggling U.S. auto industry would be unveiled in coming days.

(Editing by James Dalgleish)