U.S. stocks fell on Friday and the Dow and S&P 500 registered a third week of losses as the dollar resumed its climb, adding to worries about the impact on U.S. multinationals' earnings.
Major indexes ended off the day's lows, however, as traders took some profits on short positions ahead of the weekend, analysts said.
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The dollar hit a fresh 12-year high against the euro <EUR=> on Friday as dollar-buying momentum overcame soft U.S. economic data that would normally weaken it.
"The stronger dollar, the continued hammering of the euro, equals continued lower equity prices ahead of the Fed comments next week," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
After increased market volatility this week, investors are hopeful next week's Federal Reserve meeting will provide further insight into when the first rate increase will come.
"Right now most people are expecting a rate hike in June and the equity markets not to be very receptive of that," James said.
The Dow Jones industrial average <.DJI> fell 145.91 points, or 0.82 percent, to 17,749.31, the S&P 500 <.SPX> lost 12.55 points, or 0.61 percent, to 2,053.4 and the Nasdaq Composite <.IXIC> dropped 21.53 points, or 0.44 percent, to 4,871.76.
Over the past 14 sessions, the S&P has had a correlation of -0.96 to the dollar index, meaning that stocks consistently fall on days when the dollar gains. Perfect inverse correlation is -1.0.
For the week, the Dow was down 0.6 percent and the S&P 500 fell 0.9 percent. The Nasdaq was down 1.1 percent for the week.
While the trend has been mostly lower, the market has been volatile. This week the S&P posted both its biggest one-day gain since February and its biggest one-day loss since January.
Crude oil <CLc1> fell 4.7 percent to settle at $44.84 a barrel, hurt by the strong dollar. The International Energy Agency said a global glut continued to build and U.S. production showed no signs of slowing.
Among Friday's gainers, shares of Herbalife <HLF.N> rose 8.2 to $35.96. Billionaire investor Bill Ackman said some people hired by a consulting group working for his hedge fund had received subpoenas from federal agencies investigating possible manipulation of Herbalife's stock.
Shares of Carmike Cinemas Inc <CKEC.O> gained 9.7 percent to $34.05. People familiar with the matter said it has hired investment bank JPMorgan Chase & Co <JPM.N> to help it explore strategic alternatives.
NYSE decliners outnumbered advancers 2,127 to 906, while on the Nasdaq, 1,638 issues fell and 1,069 advanced. The S&P 500 posted 24 new 52-week highs and 26 new lows; the Nasdaq recorded 116 new highs and 92 new lows.
About 6.2 billion shares traded on U.S. exchanges, below the 6.6 billion average this month, according to BATS Global Markets.
(Editing by Bernadette Baum and Nick Zieminski)