An unemployment report showing the US economy didn't gain any jobs in August coupled with investors' reluctance to stay in the market over the holiday weekend sent stocks plunging 2 percent Friday.
The major averages turned lower for the week, erasing their gains from the last few sessions.
The Dow Jones Industrial Average fell, led by Bank of America and JPMorgan , after kicking off September with a weak start.
The S&P 500 and the Nasdaq also declined sharply. The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped near 34.
Major indexes are on track to posting the worst two-day start to September since 1974.
All 10 S&P sectors were in the red, led by financials and energy.
“We’re going to take out some of the near-term support areas,” Art Cashin, director of floor operations at UBS Financial Services told CNBC. “If we got terribly bad and we go down to 1270-75 [on the S&P], then you’d see warning signals go off. So as long as they can stay above that level, they can possibly regroup and come back.”
Employment growth ground to a halt in August as non-farm payrolls were unchanged, according to the Labor Department. It was the first time since World War II that the economy had no jobs created for a month. The jobless rate held steady at 9.1 percent.
About 45,000 jobs were impacted by the massive strike a few weeks ago at Verizon . But payrolls were weak even without the one-time impact from Verizon, and fears grew that the US was heading toward its second recession in three years.
"Today's jobs report represents what many realists already have known: There's a tremendous lack of confidence in consumer-related companies," said Todd Schoenberger, managing director at LandColt Trading. "The country desperately needs the President to be a positive influence [next] Thursday."
The dismal employment news comes ahead of President Obama's speech to a joint session of Congress next week to unveil proposals to create new jobs. Some economists are skeptical Obama will get Congress to agree to significant new spending on jobs.
Financials were under heavy pressure following a NYT report that the Federal Housing Finance Agency is suing big banksincluding Bank of America,JPMorganChase , Goldman Sachs and Deutsche Bank , accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble.
