US stocks fell as the possibility of a US$14 billion ($20 billion) fine against Deutsche Bank weighed on big banks and investors wrestled with lingering uncertainty about when the US Federal Reserve will hike interest rates.
The settlement proposal, made during negotiations between the US Department of Justice and Deutsche Bank over claims that the German bank mis-sold mortgage- backed securities, was larger than expected.
Deutsche Bank's US-listed shares slumped 9.35 per cent on Friday. Dow components Goldman Sachs and JPMorgan fell over one per cent each.
The S&P 500 financial index dropped 0.91 per cent, dragging down the benchmark index the most. The KBW Bank index fell 1.11 per cent and logged its second straight week of declines.
Traders have all but ruled out the possibility of the Federal Reserve raising interest rates at its meeting that starts next Tuesday. But residual doubts and questions about when the Fed may finally pull the trigger still hurt sentiment.
"It's the uncertainty of next week, the complacency of investors trying to re- evaluate their portfolios as we prepare for an interest-rate hike," said Jeff Carbone, co-founder of Cornerstone Financial Partners in Charlotte, North Carolina.
The Dow Jones industrial average lost 0.49 per cent to finish at 18,123.80 points and the S&P 500 fell 0.38 per cent to 2,139.16.
The Nasdaq Composite declined 0.1 per cent to 5,244.57.
With futures and options contracts expiring, about 9.3 billion shares changed hands on US exchanges, above the 6.6 billion daily average for the past 20 trading days, according to Thomson Reuters data.
For the week, the Dow edged up 0.2 per cent, the S&P gained 0.5 per cent and the Nasdaq jumped 2.3 per cent.
The technology index on Friday dropped 0.33 per cent, pulled down by Apple's 0.56-per cent decline and Oracle's 4.75-per cent drop following weak quarterly profit.
Helping limit losses was Intel's 3.04-per cent gain to a 15-year high after the chipmaker raised its third-quarter revenue forecast.
The CBOE Market Volatility index, Wall Street's "fear gauge", declined 5.7 per cent.
Declining issues outnumbered advancing ones on the NYSE by a 1.79-to-1 ratio; on Nasdaq, a 1.18-to-1 ratio favoured decliners.
The S&P 500 posted five new 52-week highs and two new lows; the Nasdaq Composite recorded 88 new highs and 50 new lows.