Five minutes into trade, the Dow Jones Industrial Average leaped 140.96 points (0.94 percent) to 15,211.14.

The broad-based S&P 500 advanced 13.85 (0.85 percent) to 1,640.58, while the tech-rich Nasdaq Composite added 29.15 (0.85 percent) at 3,452.71.

Stocks, in highly volatile trade Friday, posted their third losing week in four, with all three indices losing more than one percent.

The Fed is expected to hold a steady course on interest rates and its $85 billion-a-month bond-buying program at the conclusion of its two-day meeting Wednesday, followed by a news conference with Fed chairman Ben Bernanke.

"The prevailing assumption is that Mr. Bernanke will take the opportunity to calm the market's angst about an eventual tapering decision," said Patrick O'Hare of Briefing.com.

"For now, the market appears content to move with visions of continued Fed support in its head."

But European shares ended higher, supported by signs of merger and acquisition activity in the region. That helped boost the MSCI world index 0.1 percent on the day. The index, however, fell for a fourth straight week.

Jitters over the longevity of monetary policy around the world have roiled markets recently, and nerves were stretched further this week when the Bank of Japan decided to hold policy steady.

The concerns have fueled a selloff in global equities, emerging markets, risky bonds and commodities, which have been buoyed by central bank liquidity, while driving the safe-haven yen sharply higher.

Wall Street stocks closed their third negative week in four as investors took profits after the S&P 500 recorded its second best day of the year on Thursday. Stocks rallied more than 1 percent in the previous session on stronger US economic data.

Five minutes into trade, the Dow Jones Industrial Average was down 13.90 points (0.09 percent) at 15,162.18.

The broad-based S&P 500 lost 1.24 (0.08 percent) at 1,635.12, while the tech-rich Nasdaq Composite slipped 1.16 (0.03 percent) at 3,444.21.

Despite the rally, the S&P 500 failed to hold significantly above resistance at its 14-day moving average of 1,636.26. Support kicked in earlier in the day after the index traded below its 50-day average and again near 1,600.

Before the market opened, government data showed retail sales rose more than expected in May and first-time applications for jobless benefits fell last week, suggesting resilience in the US economy.

The market, which fell sharply on Wednesday, rose on the data, according to Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York. But he said stocks' climb was also due to the overdone selling of previous sessions.

"I expect the S&P to test support again" near 1,600, Polcari said.

Stocks had fallen every day this week up until Thursday on concern central banks could soon begin to wind down their stimulus measures. Trader angst increased after the Bank of Japan decided not to take any new measures on Tuesday, triggering a sell-off in Japanese equities and a rally in the yen.

"We have been looking for something like this to add to our equity positions," said Ian Kerrigan, senior investment specialist at JPMorgan Private Bank in Seattle, referring to the pullback.

The Dow Jones industrial average rose 180.85 points or 1.21 percent, to 15,176.08, the S&P 500 gained 23.84 points or 1.48 percent, to 1,636.36 and the Nasdaq Composite added 44.94 points or 1.32 percent, to 3,445.36.

Despite a rally in both US stocks and the yen, both have strengthened of late their inverse correlation as bets against the Japanese currency were being used to finance long positions in Wall Street equities. The 200-day correlation between the S&P and the Japanese currency stands at -0.92, near its strongest inverse correlation in more than four years.

The yen hit its strongest in the session at 93.78 per US dollar but lost momentum to trade above 95 after the closing bell on Wall Street.

Besides the strong economic data, merger and acquisition activity helped the bullish sentiment. Shares of No. 1 US newspaper chain Gannett Co soared 34 percent to $26.60 after it announced plans to buy television company Belo Corp for $1.5 billion. Belo jumped 28.3 percent to $13.77.

Safeway shares rose 7.4 percent to $24.82 a day after Empire Co, the operator of Canadian grocery chain Sobeys, said it would buy Safeway's assets in Canada for $5.7 billion.

Shares of William Cos, parent of Williams Olefins, briefly hit their lowest this year at $32.55 after a deadly explosion and fire hit the company's chemical plant in Louisiana. Shares closed down slightly less than 1 percent at $33.70.

Shares of perfume and beauty products seller Coty Inc fell in their market debut, taking the gloss off the third-largest US IPO this year. Coty shares lost 0.8 percent to $17.36.

A recent report showed total estimated outflows from long-term mutual funds were $11.53 billion for the week ended June 5, of which $10.9 billion came from bond funds. The figures from the Investment Company Institute showed outflows from stocks, though trending lower, have continued in the past weeks, indicating the recent selloff in bonds has not translated into support to equities.

About 6.3 billion shares exchanged hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly below the daily average so far this year of nearly 6.38 billion.

Advancing issues outpaced decliners by a ratio of about 11 to 2 on the NYSE. On the Nasdaq, 16 issues rose for every 5 that fell.

The gains in US equities followed a 6.4 percent drop overnight in Japan's Nikkei, its second-biggest daily drop in more than two years. European markets lost more than 1 percent before recovering to end slightly lower.

US retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week, signs of economic resilience in the face of belt-tightening in Washington.

"The bright spot for the entire week was the data point today on US retail sales. That data supports the notion that the US consumer is moving forward with spending despite the uncertainty of Fed tapering," said Anastasia Amoroso, global market strategist at J.P. Morgan Funds in New York.

The Dow Jones industrial average ended up 180.85 points, or 1.21 percent, at 15,176.08. The Standard & Poor's 500 Index gained 23.84 points, or 1.48 percent, to 1,636.36. The Nasdaq Composite Index rose 44.94 points, or 1.32 percent, to 3,445.36.

Concern about a sooner-than-expected withdrawal of central bank support mounted after recent comments from Federal Reserve Chairman Ben Bernanke on the Fed's stimulus program and a decision by the Bank of Japan earlier this week to hold off on easing further.

The worries have fueled a selloff in global equities, emerging markets, risky bonds and commodities, all of which have been buoyed by central bank liquidity, while driving the safe-haven yen sharply higher.

The Federal Reserve meets next Tuesday and Wednesday. Some analysts said if the Fed does not hint at an imminent exit from its quantitative easing next week, the market could see a relief rally.

The MSCI All-Country World Index recouped losses to gain 0.3 percent at 362.92, still well off a five-year peak last month. European shares closed 0.07 percent lower, reversing most losses as bargain-hunters picked up hammered mining and banking stocks.

An index of emerging market equities hit 11-month lows and was last down 0.8 percent. Most emerging currencies remained under heavy pressure, with the Indian rupee falling to a record low.

The dollar lost 0.8 percent to 95.26 yen as weakness in Japanese and emerging markets prompted investors to buy back the low-yielding Japanese currency, which is a favorite funding currency in these trades.

"This week's BOJ meeting, which offered no new policy initiatives or stimulus programs, was the catalyst for the rapid change in sentiment in the foreign exchange market," said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York.

The dollar fell as low as 93.78 yen, its lowest since April 4, giving back almost all the gains made since the Bank of Japan's aggressive monetary easing was announced on that day.

Losses in Japanese stocks also prompted foreign investors to unwind hedges they took out to protect themselves from the yen's recent slide. That also contributed to the yen's gain.

The euro lost 0.6 percent 127.23 yen, while against the dollar, it gained 0.2 percent to $1.3363.

Brent crude rose 76 cents to settle at $104.25 a barrel, having traded as low as $102.75 on reports indicating weak demand, including a cut in the outlook for global economic growth by the World Bank.

US crude rose 81 cents to settle at $96.69 a barrel.

Spot gold fell slightly to $1,383.76 an ounce.

Investors headed for traditional safe-haven government debt. The benchmark 10-year US Treasury note was up 25/32, the yield at 2.1381 percent. German government bonds had their biggest gains in a week.

The recent selling of euro zone periphery debt also resumed , and Italy's borrowing costs rose at an auction of three-year debt, although yields at a parallel 15-year sale were little changed.

The Dow Jones Industrial Average shed 126.79 (0.84 percent) at 14,995.23.

The broad-based S&P 500 slid 13.61 (0.84 percent) to 1,612.52, while the tech-rich Nasdaq Composite Index lost 36.52 (1.06 percent) at 3,400.43.

Wall Street stocks attempted to rally from Tuesday's sell-off in opening trade but quickly lost steam.

"Volatility is persisting, especially in the currency and bond markets, due to uncertainty regarding the continuation of global central bank stimulus efforts," Charles Schwab & Co. said in a note.

Briefing.com pointed out that the CBOE Volatility Index rose to 18.59, hitting its second-highest level of the year.

Financials were under pressure. On the Dow, American Express was the biggest decliner, plunging 2.4 percent, while Bank of America fell 0.5 percent and JPMorgan Chase lost 0.6 percent. Citigroup dropped 1.0 percent.

Cooper Tire & Rubber roared 41.1 percent higher to $34.66 after agreeing to be bought by India's Apollo Tyres for $35 a share. The $2.5 billion all-cash deal will create the world's seventh-largest tire maker.

Gigamon leaped 49.8 percent to $28.47 as the network data traffic technology company made a sizzling market debut. The initial public offering shares were priced at $19.

Yum! Brands slipped 0.1 percent after reporting May same-store sales plummeted 19 percent in China as concerns about avian flu hammered Kentucky Fried Chicken sales.

Dow member Pfizer closed flat after it and Japanese pharmaceutical firm Takeda won a $2.15 billion settlement in a patent-infringement case against generic drug makers Teva of Israel and Sun of India. Pfizer said it would receive 64 percent of the amount, or $1.4 billion. Teva's US-traded shares fell 1.9 percent.

Hewlett-Packard was the biggest of the rare Dow gainers, up 2.8 percent after chief executive Meg Whitman gave a positive interview to CNBC.

Tobacco giant Altria added 0.3 percent after Barclays raised its rating to "overweight" from "market weight."

Bond prices fell. The yield on the 10-year US Treasury rose to 2.23 percent from 2.20 percent late Tuesday, while the 30-year jumped to 3.38 percent from 3.33 percent. Bond prices move inversely to yields.

The decline was triggered in Tokyo when the Bank of Japan elected not to take fresh measures to tackle rising government bond yields that threaten to thwart its $1.4 trillion stimulus program.

The yen soared, with the US dollar down 3 percent and on pace for its worst daily performance since March, 2011 against the Japanese currency.

The BOJ decision sparked a further reversal of bets on stocks, emerging-market debt and other assets bolstered by accommodative monetary policies. Investors have become more nervous in recent weeks over when the US Federal Reserve may slow its supportive measures.

The prospect of reduced stimulus has halted a rally that took US indexes to all-time highs and the MSCI All-Country World Index to a five-year peak. The MSCI index was last down 0.6 percent.

"A lot of what has fueled the rally in equity indexes has been a combination of improvement in earnings and the economy, but in the background there was always the idea that easy money was helping elevate asset prices," said Kevin Caron, market strategist at Stifel, Nicolaus & Co. in Florham Park, New Jersey.

"We are now hearing from various central banks it is possible that expectations for the future are needing to be dampened down a little," he said. "By not following through with more substantive easing, the BOJ adds to this, and weaker equity markets around the world are reflecting this unease."

The Dow Jones industrial average dropped 116.57 points, or 0.76 percent, to close at 15,122.02. The Standard & Poor's 500 Index fell 16.68 points, or 1.02 percent, to 1,626.13. The Nasdaq Composite Index lost 36.82 points, or 1.06 percent, to 3,436.95.

European shares fell to six-week lows. The pan-European FTSEurofirst 300 index .FTEU3 closed down 1.2 percent at 1,179.57.

The selling spread across emerging economy shares as well, sending MSCI's benchmark index to a nine-month low and extending losses caused by political tensions in Turkey and worries about China's slowing economy. The index was last down 1.7 percent.

The dollar dropped 2.8 percent to 96.01 yen, having hit a session low of 95.60 yen, according to Reuters data. The euro fell 2.4 percent to 127.82 yen.

The BOJ held off on new measures on Tuesday, arguing that bond markets had stabilized. While BOJ Governor Haruhiko Kuroda did subsequently try to reassure the markets the central bank would consider fresh steps if yields spiked again in the future, the decision rattled many foreign investors.

"Headed into the meeting there was some hope they would extend the lending terms and they disappointed on that end," said Vassili Serebriakov, foreign exchange strategist at Wells Fargo in New York.

Serebriakov said the yen also rallied as a selloff in emerging-market currencies forced investors to buy back the Japanese currency. Many investments in these currencies were funded in yen, which can be borrowed at interest rates that are among the lowest in the world.

Against the dollar, the euro rose 0.4 percent to $1.3310 , while the US dollar index slipped 0.7 percent to 81.060.

Oil prices slumped after the United States nearly doubled the estimate of its shale oil and as investors worried that central banks, following Japan's example, could begin to rein in their loose monetary policies.

The US Energy Information Administration revised its estimate on domestic shale oil reserves to 58 billion barrels, up from 32 billion in 2011, as new drilling techniques unlocked deposits.

Brent crude dropped 99 cents to settle at $102.96 a barrel , while copper fell to a one-month low at $7,065 a tonne . US crude fell 39 cents to settle at $95.38.

Gold fell to a near three-week low and last traded at $1,378 an ounce.

The benchmark 10-year US Treasury note was up 9/32, the yield at 2.1792 percent.

One trader cited talk that the dollar/yen's move back to the "95 handle" had prompted buying by a large hedge fund.

Japan's Nikkei index closed down 1.5 percent, though this followed Monday's 4.9 percent gain, while MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 1.1 percent to hit 6-1/2-month lows.

Major indexes fell more than 1 percent after the open but shaved most of the losses by midday, only for the selling to resume towards the session's end. However, overall volume was average.

Financial and energy shares led the way down on the S&P 500. The 10 major sectors of the index closed the day lower but defensives including consumer staples and healthcare fared better.

The decision by the Bank of Japan roiled various markets as trades built around central bank support of major economies have begun to unwind in the past weeks. Benchmark US Treasury yields briefly approached 2.3 percent, the highest in 14 months, and equities dropped globally, while the yen posted its strongest day against the US dollar in more than 2 years.

Investors in US markets have become more nervous in recent weeks over when the Federal Reserve may slow its accommodative measures, which have been a pillar of the S&P 500's gain of 14 percent so far this year.

"A lot of what has fueled the rally in equity indexes has been a combination of improvement in earnings and the economy, but in the background there was always the idea that easy money was helping elevate asset prices," said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.

"We are now hearing from various central banks it is possible that expectations for the future are needing to be dampened down a little," he said. "By not following through with more substantive easing, the BOJ adds to this, and weaker equity markets around the world are reflecting this unease."

The Dow Jones industrial average fell 116.57 points or 0.76 percent, to 15,122.02, the S&P 500 lost 16.68 points or 1.02 percent, to 1,626.13 and the Nasdaq Composite dropped 36.82 points or 1.06 percent, to 3,436.95.

The Bank of Japan in April announced a $1.4 trillion stimulus program, and while it left the door open to more action if borrowing costs spike, the lack of additional measures to curb recent volatility in the bond market rattled trading.

The S&P 500's steady climb so far this year has gotten bumpier since comments from Fed Chairman Ben Bernanke last month sparked uncertainty over the US central bank's timeline for slowing its $85 billion a month bond purchases.

Among individual companies, shares of Lululemon Athletica slumped 17.5 percent to $67.85 after the company's chief executive said she will step down once a replacement is found.

Dole Food Co jumped 22.2 percent to $12.46 after the company received an unsolicited buyout offer from its chief executive.

US-traded shares of pharmacy benefit manager Catamaran Corp jumped 11 percent to $53.99 as at least six brokerages raised their price targets on the Canadian company after it signed a 10-year agreement with health insurer Cigna Corp.

SoftBank Corp said it agreed with Sprint Nextel Corp to raise its offer for the US wireless carrier to $21.6 billion from $20.1 billion. Sprint was up 2.4 percent at $7.35.

Volume was roughly in line with the 6.38 billion shares traded daily on the New York Stock Exchange, the Nasdaq and NYSE MKT so far this year.

Decliners outpaced advancers by 6.6 to 1 on the NYSE and by 2.8 to 1 on the Nasdaq.

The biggest drag on the market was integrated energy company Suncor Energy Inc, which fell 2.3 percent to C$31.07. Other big energy losses included TransCanada Corp's, 1.5 percent fall to C$46.12.

Nine of the 10 main subgroups of the TSX index ended the day down.

The wide selloff was sparked by the Bank of Japan, which did not to take any fresh measures on Tuesday to tackle rising government bond yields, which threaten to thwart its $1.4 trillion stimulus program.

That announcement followed recent remarks by US Federal Reserve Chairman Ben Bernanke that signaled a possible slowdown in the Fed's asset-buying program in the coming months.

"The selloff today is a reflection of concerns around reducing monetary policy stimulus around the world," said Craig Fehr, Canadian market strategist at Missouri-based investment firm Edward Jones. "It's more about rhetoric than action, there isn't a tremendous amount of economic data. We're just seeing knee-jerk reactions from the market."

The Toronto Stock Exchange's S&P/TSX composite index ended the day down 159.10 points, or 1.28 percent, at 12,223.57.

The decline was mirrored by equity markets globally, along with falls in the price of commodities and the value of the US dollar.

The TSX index's materials group was hit by weakness in the gold sector. Barrick Gold Corp dropped 3.9 percent to C$19.99, and Goldcorp Inc fell 3.1 percent to C$28.27.

Kinross Gold Corp was down 6.4 percent at C$6.03 after the company announced it had halted development at a gold project in Ecuador.

Shares in financial firms also swooned in the wake of the Bank of Japan announcement, with shares in the Royal Bank of Canada showing the biggest drop, 1.2 percent, to C$59.42. Toronto-Dominion Bank lost nearly 1 percent to close at C$81.67, while Bank of Nova Scotia lost 0.9 percent to C$56.86.

Yogawear maker Lululemon Athletica Inc fell more than 17.6 percent after saying its chief executive was stepping down. It closed at C$69.22.

One bright spot was Catamaran Corp, a pharmacy benefits manager. Shares in the company surged more than 10 percent to C$54.91 after major US health insurer Cigna Corp said the pair had signed a 10-year agreement.

At the closing bell, the Dow Jones Industrial Average fell 116.49 (0.76 percent) to 15,122.10.

The broad-based S&P 500 dropped 16.64 (1.01 percent) to 1,626.17, while the tech-rich Nasdaq Composite Index sank 36.82 (1.06 percent) to 3,436.95.

The losses came as the Bank of Japan opted against increasing its asset purchase program or changing interest rates.

"The expectations was that Japan would keep increasing it," said Andrew Fitzpatrick of Hinsdale Associates. "There was a sort of a built-in belief that there was going to be more there."

The restraint in Japan also raised questions about the US Federal Reserve's future direction of policy measures ahead of next week's Federal Open Market Committee meeting.