U.S. stocks fell on Friday as energy shares dropped on worries about weak oil demand, and banks slipped as investors took recent profits in the sector.

A batch of reports, including consumer prices and sentiment, reinforced hopes the recession was easing and gave the market an early lift, but it was short-lived. Options expiration added to volatility.

Chevron Corp and Exxon Mobil Corp were the biggest drags on the Dow as U.S. crude oil futures tumbled $2.28, or 3.9 percent, to settle at $56.34 a barrel, with dealers increasingly pessimistic about the outlook for global energy demand. Chevron lost 2.4 percent to $65.60 while Exxon slipped 1.6 percent to $68.67.

JPMorgan Chase & Co , down 1.5 percent at $35.01, was another drag on the blue-chip index and contributed to the 3.2 percent slide in the KBW bank index <.BKX>. The KBW index has doubled since early March as investors hoped banks had seen the worst of the fallout from the credit crisis.

The Dow Jones industrial average <.DJI> fell 87.93 points, or 1.06 percent, to 8,243.39. The Standard & Poor's 500 Index <.SPX> dropped 11.80 points, or 1.32 percent, to 881.27. The Nasdaq Composite Index <.IXIC> lost 7.24 points, or 0.43 percent, to 1,681.97.

Equity options and some options on stock indexes stop trading at Friday's close and expire the next day. Typically, options expiration is orderly, but some volatility may occur as players unwind positions against stock and index products.

The CBOE volatility index <.VIX> jumped almost 7 percent.

(Reporting by Rodrigo Campos; Editing by Jan Paschal)

Investment Energy