Stocks slipped on Friday as investors took profits following a recent surge, and energy shares drooped along with the price of oil.

With developments in Washington increasingly setting the market's direction, President Barack Obama -- who needs to persuade banks to participate in his administration's plan to fix the financial crisis -- is meeting with top bankers but has no specific agenda, a senior White House advisor said.

Bank shares had been among the leaders in the recent run-up, but Bank of America was up only 0.3 percent to $7.60 while JPMorgan Chase was down 1.4 percent to $28.70. The KBW bank index <.BKX>, down 0.8 percent for the session, is, however, still up more than 60 percent from a low set on March 6.

Exxon Mobil and Chevron were among the Dow's top drags as U.S. crude futures fell more than 4 percent to about $52 per barrel amid economic concerns and a stronger U.S. dollar, a day after closing at a four-month high. Exxon fell 1.4 percent to $70.26 and Chevron sagged 1.3 percent to $69.28.

We've come a long way in a big hurry; it makes sense that we would take a little breather, said Chip Hanlon, president of Delta Global Advisors in Huntington Beach, California.

It just looks like an unwinding of recent trends and probably some profit-taking.

The Dow Jones industrial average <.DJI> fell 121.06 points, or 1.53 percent, to 7,803.50. The Standard & Poor's 500 Index <.SPX> dropped 11.89 points, or 1.43 percent, to 820.97. The Nasdaq Composite Index <.IXIC> lost 27.59 points, or 1.74 percent, to 1,559.41.

Stocks had rallied on increasing optimism that the worst of the current downturn might be over and on government action geared at stabilizing the ailing financial system.

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.

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.

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.

Shares of Intel fell more than 2 percent to $15.46 after the chipmaker said it might issue up to $1 billion in stock. Other standout decliners were Apple , down 2.3 percent to $107.36, and Microsoft , down 2.5 percent to $18.35.

IBM was the top drag in the Dow industrials, down 5.5 percent to $93.33.

A drop in commodities prices weighed on stocks in the materials sector, and aluminum producer Alcoa fell 2.6 percent to $7.91. The Reuters-Jefferies CRB index of commodities <.CRB> shrank nearly 2 percent.

General Motors was a bright spot, with its shares up 10.9 percent to $3.78 a day after Obama said a plan to help the struggling U.S. auto industry would be unveiled soon, and after news GM's German unit, Opel, forecast what could be the best quarterly results in a decade.

(Editing by James Dalgleish)