Investors abandoned stocks Friday after the US government reported that only 80,000 jobs were created in June, the third straight month of weak hiring.
The Dow Jones industrial average fell 124.20 points to close at 12,772.47. The loss wiped out the Dow's gain for the week.
The reluctance of U.S. employers to add jobs shows that the economy is still struggling three years after the recession officially ended. An average of just 75,000 jobs were created every month in the April-June quarter, far below the 226,000 created every month in the first three months of the year.
"It shows the U.S. economy is losing momentum," said Sharon Stark, chief market strategist at the brokerage firm Sterne Agee. "It's a sign of everyone waiting to see what's next."
Of the 30 stocks in the Dow average, only five rose, including McDonald's and AT&T. The world's largest producer of aluminum, Alcoa, and Caterpillar, the construction equipment maker, were among the hardest-hit Dow stocks with declines of about 3 percent each. Materials and industrial companies are the most likely to suffer if the economy weakens.
The anemic jobs report led investors to shift money into low-risk assets. The price of the 10-year Treasury note rose, sending its yield down to 1.55 percent from 1.60 percent late Thursday. The dollar rose against the euro.
The new signs of economic sluggishness around the world sent commodities prices lower. Crude oil dropped $2.77, or 3 percent, to $84.45 a barrel. The U.S. is the world's biggest oil consumer, and the prospect of lower demand pushed down prices.
One of the reasons stocks fell is that though the jobs report was weak, the country isn't heading into a recession. That suggests the Federal Reserve is less likely to take more action to stimulate the economy, according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds.
A new round of bond-buying by the Fed is "quite unlikely," Jacobsen said. The Federal Reserve has made two rounds of bond purchases since the financial crisis to keep interest rates low and encourage banks to lend money.
European markets also lost ground on Friday. A week after investors welcomed an agreement among European leaders to help Spain and Italy, the borrowing rates of both countries rose again. That means bond investors are less willing to loan those countries money at favorable rates.
The yield on the 10-year Spanish government bond rose 0.22 percentage point to 6.96 percent earlier in the day. That's a very high level and could eventually force Spain to seek more financial support from its neighbors in Europe.
Other Wall Street stocks making big moves included:
— Navistar International. The truck maker's stock fell $4.37, or over 15 percent, to $24.42 on investor worries that the heavy engine and truck maker will have to incur additional costs to get a crucial new engine approved by federal regulators.
— Sequenom Inc. The stock fell 8 cents, or 2 percent, to $3.99 after a California court refused to block a competitor from selling a similar product to Sequenom's Down syndrome test for pregnant women.
— Informatica Corp. The business software maker fell $12, or 28 percent, to $31.36 after warning that its second-quarter results didn't live up to the projections of its management or analysts.