Stocks eased off their worst levels in the final hour of trading, but still finished firmly in the red Friday on the heels of a disappointing June government jobs report.
The Dow and the S&P 500 posted weekly losses, while the Nasdaq managed to eke out a gain for the fifth-consecutive week.
The Dow Jones Industrial Average tumbled 124.20 points, or 0.96 percent, to close at 12,772.47, led by Caterpillar and H-P .
The S&P 500 fell 12.90 points, or 0.94 percent, to end at 1,354.68. The Nasdaq dropped 38.79 points, or 1.30 percent, to finish at 2,937.33.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended near 17.
For the week, the Dow shed 0.84 percent, the S&P 500 erased 0.55 percent, while the Nasdaq squeezed out a gain of 0.08 percent. BofA was the biggest laggard on the Dow for the week, while Wal-Mart gained.
Industrials led the weekly key S&P sector decliners, while consumer staples climbed.
"The economic recovery is clearly stuck in quicksand as job creation remains anemic and layoff announcements soar," said Todd Schoenberger, managing principal at The BlackBay Group.
Non-farm payrolls rose by 80,000, according to the Labor Department, missing expectations for a gain of 90,000 jobs, according to a Reuters poll. Meanwhile, the unemployment rate remained unchanged from May at 8.2, in line with predictions. (Read More—Jobs Data Not Recessionary: Hatzius)
With yet another month of weak employment growth, the second quarter marks the weakest three-month period in two years, fueling optimism that the Federal Reserve will step in with additional monetary easing. Recent economic reports have been dismal with the ISM manufacturing index earlier this week indicating a contraction for the first time in nearly three years.
“These numbers are not bad enough to warrant Fed involvement,” said Schoenberger. “You’re not going to get anything from the Fed unless anything catastrophic happens such as a loss on non-farm payrolls or GDP under 1 percent—the Fed is reactive, not proactive.”
The euro slumped below $1.23against the U.S. greenback, to trade at a two-year low.
“Take this [selloff] with a grain of salt because it’s a holiday week so some of the moves are magnified,” said Brian Battle, vice president of trading at Performance Trust Capital Partners, referring to the light market volume.
Among financials, Deutsche Bank tumbled following reports German regulators are investigating the financial services company on possible Libor rate manipulation, according to sources. The probe comes a week after Barclays
Meanwhile JPMorgan and BlackRock have closed off their European money-market funds to new investors, while Goldman Sachs stopped accepting new money in its GS Euro Government Liquid Reserves Fund, according to reports.
The moves come a day after the ECB cut its rates by quarter of a point and slashed deposit rates to zero. In addition, the Bank of England moved forward with more quantitative easing, while the People's Bank of China moved forward with surprise rate cuts. Still, the central bank actions did little to lift equities.
IMF Managing Director Christine Lagarde voiced concern over a slowdown in developed and big emerging economies echoing concerns voiced by ECB President Mario Draghi who said the euro zone economy would recover only gradually.
“Second half of the year is going to be exceedingly difficult because the problems that have plagued us in the first half aren’t going away,” said Brian Battle, vice president of traidng at Performan Trust Capital Partners. “Fixed income is still the place to be—preservation of capital is a great thing.”
Earnings season kicks off next week, with Dow component Alcoa scheduled to announce earnings results on Monday.
“History has shown us that on the day that Alcoa reports, there’s renewed optimism in the market,” noted Schoenberger. “So if history proves itself, Monday should be an up day.”
Yahoo is considering Hulu CEO Jason Kilar for its permanent CEO position, according to reports. Interim CEO Ross Levinsohn is also said to be a candidate, along with News Corp's Jonathan Miller.
Meanwhile, Yahoo and Facebook have agreed to an advertising partnershipas part of a final settlement of patent lawsuits, according to AllThingsD.
Seagate Technology slipped after the storage device maker said it expects to miss its fourth-quarter revenue estimates.
Also among techs, Informatica plunged almost 30 percent after the data manager handed in a disappointing guidance due to worries over Europe. Rival data-storage company Teradata tumbled more than 10 percent.
Five big retailers including Walgreen , Kroger , Safeway , SuperValu and HEB Grocery filed an antitrust lawsuitagainst Pfizer and India's Ranbaxy Laboratories, accusing them of conspiring to delay sales of generic versions of the popular cholesterol drug Lipitor.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
On Tap Next Week:
MONDAY: Fed Pres Rosengren, Evans, Williams speak, consumer credit; Earnings from Alcoa
TUESDAY: NFIB small biz optimism index, 3-yr note auction, RIM annual mtg
WEDNESDAY: Weekly mortgage apps, international trade, wholesale trade, oil inventories, 10-yr note auction, FOMC minutes; Earnings from Marriott, Chevron interim results
THURSDAY: Jobless claims, import & export prices, Fed Pres Williams speaks, 30-yr bond auction, Treasury budget, Facebook hearing; Earnings from Fastenal
FRIDAY: PPI, consumer sentiment, Fed pres Lockhart speaks, Dell shareholders mtg; Earnings from JPMorgan, Wells Fargo
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