Alarmed by an ominously weak US jobs report
, investors ran for safety on Friday from new worries about a global slowdown, sending the Dow Jones industrial average to its biggest loss since November.
The nearly 275-point dive wiped out the last of the index's gains for the year.
Across Wall Street, fearful investors snapped up safer investments such as bonds, dragging the yield on the benchmark 10-year Treasury note to a record low. Gold spiked $50 an ounce, and oil fell to its lowest since October.
"The big worry now is that this economic slowdown is widening and accelerating," said Sam Stovall, chief equity strategist at S&P Capital IQ, a market research firm.
The Standard & Poor's 500 index and Nasdaq composite index both fell more than 2 per cent. The Nasdaq has dropped more than 10 per cent since its peak - what traders call a market correction. And the S&P 500 is just a point above correction territory.
American employers added just 69,000 jobs in May, the fewest in a year, and the unemployment rate increased to 8.2 per cent from 8.1 per cent. Economists had forecast a gain of 158,000 jobs.
The report, considered the most important economic indicator each month, also said that hiring in March and April was considerably weaker than originally thought.
Earlier data showed weak economic conditions in Europe and Asia, too. Unemployment in the 17 countries that use the euro currency stayed at a record-high 11 per cent in April, and unemployment spiked to almost 25 per cent in Spain.
There were signs that growth in China, which helped sustain the global economy through the recession, is slowing significantly. China's manufacturing sector weakened in May, according to surveys released on Friday.
The Dow closed down 274.88 points, or 2.2 per cent, at 12,118.57. The Dow is off 0.8 per cent for the year; two months ago, it was up more than 8 per cent for the year.
The Standard & Poor's 500 index fell 32.29 points, or 2.5 per cent, to 1,278.04. The Nasdaq dropped 79.86, or 2.8 per cent, to 2,747.48. Both indexes are still up for the year - 1.6 per cent for the S&P 500 and 5.5 per cent for the Nasdaq.
The yield on the benchmark 10-year US Treasury note briefly fell to 1.44 per cent, the lowest on record. It ended the day at 1.46 per cent. Gold for August delivery climbed $57.90, nearly 4 per cent, to $1,622.10 per ounce.
"Everybody's looking for a safe haven," said Adam Patti, CEO of IndexIQ, an asset management firm. He's skeptical of that strategy, believing the swing was driven by short-term traders "looking to flip in and out of things," rather than long-term investors willing to ride out a few bumps in the market.
May was the worst month for the stock market in two years by some measures. Investors' worries about Europe's debt crisis intensified as the month wore on. Greece's political future is uncertain, and it appears increasingly likely to stop using the euro currency. That could rattle financial markets and make Greece's economy - already hobbled - even weaker.
Friday's jobs report drew traders' attention back to the weakening US economy, said Todd Salamone, director of research for Schaeffer's Investment Research in Cincinnati.
"The weaker jobs report translates into anticipation of slower growth ahead and weaker corporate earnings, and that ratchets stock prices lower," Salamone said.
The record-low yield on the 10-year Treasury note reflected rapid buying by traders with the biggest portfolios, including central banks, endowments and pension funds, said Ira Jersey, US interest rate strategist at Credit Suisse. He said money managers were selling investments priced in euros and stashing their money in US securities.
Several analysts raised the possibility that the weakening economy will prompt more action by governments and central banks seeking to juice global economic activity. Anticipation of some policy response prevented even deeper losses, Stovall said.
The Federal Reserve undertook programs in 2009 and 2010 to buy US government bonds. Its goal was to lower interest rates and encourage people to buy riskier investments like stocks. At least in public, the central bank so far has resisted a third round of purchases, known as quantitative easing.
Anticipation of bond-buying by the Fed "might put in a little bit of a floor to the market, but the overall economic picture is still bad," said Bob Gelfond, CEO of MQS Asset Management, a New York hedge fund.
The dollar fell and gold rose partly because traders expect more intervention by the Federal Reserve, Gelfond said.
The euro rose half a penny against the dollar to above $1.24. A day earlier, fears about Europe's finances had pushed the euro to a nearly two-year low against the dollar.
Only 17 of the 500 companies in the S&P index were higher for the day.
Homebuilder stocks fell the most, despite a report that construction spending rose for a second month in April. PulteGroup fell 11.8 per cent, D.R. Horton 8.4 per cent and Lennar 8.3 per cent.
Boeing, the biggest US exporter, fell 3.4 per cent, one of the steepest declines among the 30 companies that make up the Dow. Traders fear that the economic slowdown will hurt global demand for its airplanes and defence technologies.
A slower global economy would reduce demand for energy. The price of a barrel of oil fell $3.49 to $83.04, extending a monthlong slide. The price of oil is at a 16-month low.
Stocks closed way down in Europe. Greece's benchmark stock index fell 4.4 per cent, Germany's 3.4 per cent and France's 2.2 per cent.