The Dow Jones Industrial Average dove below the 10000 level with a 3 percent drop for the day, closing at 9931.
The Dow index has fallen in five of the past six weeks. European stocks also declined Friday, and the euro currency descended below $1.20 in value for the first time in four years.
Behind the worry on Wall Street: concern that nascent economic recovery is more fragile than it appeared a month ago, when the Dow index stood above 11000. In turn, shaky financial markets could take their own toll on the economy, if a falling stock market dampens consumer confidence.
Friday's bad news
America also became a source of bad news. The US created 431,000 jobs in May, the Labor Department reported, but the gains didn't represent permanent hiring. Instead almost all the growth was in short-term federal Census jobs.
Coming after an April report that showed solid private-sector job gains, Friday's news highlighted the large degree of uncertainty that besets financial markets worldwide.
Just a few weeks ago, the International Monetary Fund boosted its forecast for the global economy. Now, although some economists warn that advanced nations could dip back into recession, most forecasters continue to see modest growth ahead.
"We do not yet have the makings of a double-dip," economist Nigel Gault wrote Friday in an analysis for IHS Global Insight of Lexington, Mass. "We still believe that private sector job creation will gradually improve over the rest of the year."
US economic growth promises to be tepid, at an annual pace below 3 percent, he says.
Case for a bull vs. case for a bear
The bullish case for stocks is that economic expansion won't be derailed by Europe or a possible slowdown in China, and that corporate earnings will continue to grow even though the US jobs recovery is slow.
The bear case is that uncertainty about the health of European banks, which hold debts of nations like Greece, will make global banks wary of lending to one another. The result could be a new tightening of credit conditions that would slow the recovery.
Bears also see the recovery in spending by US consumers as heavily dependent on government stimulus programs, which are set to diminish after this year. The falling euro, meanwhile, can adversely affect profits for companies with big sales overseas.
A tussle between bulls and bears has been visible for several weeks in the Dow index, which has been hovering near the symbolically important 10000 level.
Meanwhile, the same economic concerns that have caused stocks to sag have also weighed on the prices of commodities such as oil. Gold, however, rose Friday due to its role as a haven in times of turmoil.
If stocks are volatile these days, many investors also see bonds as fraught with a different kind of risk. Treasury bonds have been rising in value, as a flight-to-safety play by investors. But that could set them up for a big tumble if the level of fear in financial markets recedes.