U.S. stocks sank Friday, as the Dow erased all its gains for the year, and the 10-year yield on U.S. Treasuries hit another record low, after a U.S. jobs report fell far short of expectations.
The jobs report showed only 69,000 jobs were added to payrolls, less than half the 150,000 jobs forecast by economists surveyed by CNNMoney. The unemployment rate ticked higher for the first time in a year, rising to 8.2%.
"The U.S. employment report was simply terrible," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
The Dow Jones industrial average plunged 220 points, or 1.8%. The blue-chip index gave up all its gains for the year, and is now 40 points below where it finished 2011. The S&P 500 lost 26 points, or 2%, and the Nasdaq dropped 62 points, or 2.2%.
The sell-off was broad, with all 30 Dow components in the red, and 95% of the S&P 500 trading lower.
The CNNMoney Fear and Greed index showed investor confidence sliding even farther into "extreme fear" territory on the news.
As jittery investors fled stocks, they plowed into the safety of U.S. government debt, pushing the yield on the 10-year Treasury note to a fresh record low below 1.5%.
"The move in bond markets is even more telling," said Joe Saluzzi, co-head of equity trading at Themis Trading. "A 1.5% 10-year yield? That's fear."
Bond yields have been in record low territory for the past couple of weeks, as fears of Europe's escalating debt crisis have been building. A report on Friday showed the eurozone unemployment rate at a record high of 11%.
Concerns about slowing growth in emerging markets, including China and India, have also put investors on edge. Two reports out of China Friday morning showed that the manufacturing sector contracted more than expected in May, fueling investors concerns that the country may be headed for a hard landing.
As global economic growth has slowed in the last year, exports to Europe -- China's largest foreign market -- have taken a hit as the debt-ridden region teeters on the brink of recession.
"We've got concerns about Europe, China, India, the United States -- this is a global problem," said Saluzzi. "Investors have no place to hide."
Given the growing fears, and fragile market and economic environment, Saluzzi said central banks around the world -- particularly the European Central Bank and the Federal Reserve -- will likely come out with plans to help stimulate the global economy.
Speculation that the Fed will launch a third round of bond buying, or QE3, which is meant to keep long-term interest rates low, has been growing, but Saluzzi is not convinced that it's the right solution.
"Interest rates are already low, and that hasn't worked," he said. "I'm sure the Fed will try something, because that's what it does, but it needs to attack from a different angle."
U.S. stocks finished in the red Thursday, ending a difficult month on a weak note. The Dow and S&P 500 dropped more than 6% in May, while the Nasdaq shed more than 7%.
Economy: Personal income and personal spending for April increased 0.2%. Analysts had expected the figure to increase by 0.3%.
The May installment of the ISM Manufacturing Index showed that U.S. manufacturing growth slowed in May. The index fell to 54.5, down from 54.8 last month and below expectations of 54. Any reading above 50 indicates growth in the sector.
April construction spending rose by 0.3%, but that was below forecasts for a 0.5% rise.
Companies: Shares of Facebook hit a fresh low of $26.83 Thursday before bouncing back, ending the day up 5% at $29.60. The stock resumed its downward push Friday, shedding more than 5% in midday trading.
Shares of food producer Sara Lee slipped after the company said it was spinning off its international coffee and tea business, which will pay a special dividend to existing Sara Lee shareholders. Sara Lee also announced a 1-for-5 reverse stock split.
BP said it was considering selling its 50% stake in TNK-BP, a Russian oil joint venture, after it received an unsolicited bid for the holding. Shares of BP gained ground.
Groupon shares fell. The online discount service, which has been dogged with questions about its accounting practices since its initial public offering in November, ends its lock-up period Friday, meaning that insiders who own shares will be able to sell them.
The nation's Big Three automakers -- General Motors, Ford Motor and Chrysler -- all reported a jump in car sales in May, but the results were less than expected by some analysts -- another sign that the U.S. economy, while growing, remains weaker than hoped.
World markets: European stocks closed deep in the red. Britain's FTSE 100 dropped 0.9%, while the DAX in Germany sank 3.2% and France's CAC 40 tumbled 2.5%.