Stocks fell about 1 percent on Friday as a strengthening in the dollar due to global uncertainty caused a drop in commodity-related and financial shares.

The euro fell against the dollar as investors refocused on euro zone debt before meetings by finance officials in Brussels and as the Federal Reserve moved closer to ending a stimulus program.

The dollar <.DXY> gained 0.9 percent against a basket of currencies. For details, see

Stocks have been subjected to turbulence over the past week, with markets becoming highly sensitive to swings in the dollar as it forces reversals in commodity sensitive areas.

U.S. crude futures lost 0.9 percent and the S&P energy index <.GSPE> lost 0.7 percent.

Financials were among the hardest hit on the fears the euro zone debt crisis could worsen. The KBW Bank index <.BKX> dropped 1.7 percent, weighed down by 2 percent drop in JPMorgan Chase & Co to $43.06.

There is clearly a move into the dollar, which is again a flight to safety and a flight to quality taking place. That is the play. It's all one trade, it's the dollar, it's the euro, it's the gold, it's the financials now, said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

You've got these major financial shattering events potentially lurking out there that you don't know how to play. Therefore, my view is when in doubt, get out.

The CBOE Volatility Index <.VIX>, used as an indicator of investor fear, surged 8 percent.

The Dow Jones industrial average <.DJI> dropped 121.48 points, or 0.96 percent, to 12,574.44. The Standard & Poor's 500 Index <.SPX> dropped 11.89 points, or 0.88 percent, to 1,336.76. The Nasdaq Composite Index <.IXIC> dropped 29.38 points, or 1.03 percent, to 2,833.66.

In recent weeks, leadership in the S&P 500 has shifted from cyclical sectors like energy and basic materials to sectors with more stable growth like healthcare and utilities.

The new leadership sectors outperformed on Friday, with the Morgan Stanley Healthcare Payor index <.HMO> up 0.1 percent and the S&P consumer staples sector off 0.2 percent.

Economic data showed U.S. inflation raced to a 2-1/2 year high in April as food and gasoline prices rose, but there was little sign of a broader pick-up in consumer prices while an indicator of consumer sentiment rose.

Yahoo Inc shares fell 4.3 percent to $16.44 after it said the Alibaba Group restructured the ownership of Alipay, one of China's largest online payment businesses, without the knowledge of Yahoo and Softbank, two of its stakeholders.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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