The market briefly sank more than 1.4 percent erasing all gains for the year as another wave of depressing economic reports
took their toll on investors.
Meanwhile, the 10-year yield on U.S. Treasuries hit another record low in a world market sell off as the May jobs report showed a disappointing 69,000 jobs were created – less than half forcast by most economic anaylists.
"The U.S. employment report was simply terrible," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
As worried investors abandoned stocks, they nestled in the relative safety of U.S. government debt, pushing the yield on the 10-year Treasury note to a new record low under 1.5%.
Reflecting stalled jobs growth
, U.S. stocks ending a down month with more loses. The Dow and S&P 500 dropped more than 6% in May and the Nasdaq shed more than 7%.
While Asian markets are mixed - the Shanghai Composite (SHCOMP) closed slightly above breakeven, while the Hang Seng (HSI) in Hong Kong slid 0.4% and Japan's Nikkei (N225) fell 1.2% - employers in Europe slashed 110,000 jobs across the eurozone in April. Unemployment in the eurozone reached11% , a record since creation of the common currency. Eurozone manufacturing reports released Friday also showed further declines.
European stocks slumped in afternoon trading. Britain's FTSE 100 (UKX) dropped 1.3%, while the DAX (DAX) in Germany sank 3.4% and France's CAC 40 (CAC40) fell 2.8%.
Adding to mounting global economic chaos, two manufacturing reports out of China released Friday show that the sector contracted more than expected in May, raising concerns that China may be headed for an economic slump.
Exports to Europe - China's largest foreign market - have dropped dramatically as the region grapples with massive government debt and economic recession.
In the U.S., economic woes set the stage for a battle between incumbent President Barack Obama and Republican challenger Mitt Romney
. The two are tied in most major polls however most Americans surveyed believe the country is headed in the wrong direction.