Futures sank after the government released a disappointingly small gain in nonfarm payroll employment for November.
Nonfarm payrolls rose by only 39,000 in November, far less than the 140,000 forecasted by economists surveyed by Reuters, according to the U.S. Labor Department. Private payrolls rose by 50,000, also less than expected.
Employment for September and October was revised to show 38,000 more jobs were created in those months than previously estimated.
"This is kind of a blow as we head into the end of the year, definitely," said Dan Cook, chief executive of IG Markets. "We’re not even staying above water at this point."
The disappointing result likely means the Federal Reserve will continue with plans to boost the economy through long-term bond purchases, a policy known as quantitative easing, Cook said.
As a result the markets may not react that strongly to the number. Typically, in fact, the market usually ends modestly up or down on the day of an employment report, even when the number is surprisingly bad, he added.
"We usually see a lot of quick moves and some profit taking, and it gets settled out at the end," Cook said.
"Many will argue the employment trend is moving in the right direction, albeit slowly, but it may not be enough to minimize further Fed involvement in 2011," said Todd Schoenberger, managing director LandColt Trading. "Clearly the number isn't 'eye popping' and will promote heavy selling in the markets following two solid days of gains."
The news came a surprise to many who had taken heart in a string of positive economic reports, and a strong start to the holiday shopping season.
Stocks had soared in the last two sessions on those upbeat economic reports.
European shares struggled to make gains with concerns over the ongoing debt crisis still in focus. Standard & Poor's said it may downgrade the debt rating of Greece depending on the rules attached to the country's recent bailout.
Asian indexes ended mixed after news reports suggested China could be set to continue its tightening of monetary policy.
Also on the economic front, October factory orders will be released at 10 a.m. with consensus calling for a decline of 1.3 percent, according to Briefing.com. The Institute for Supply Management will issue data on the services sector for November at the same time.
In other news, the Federal Reserve's $600 billion bond buying program can be adjusted if necessary and will be subject to regular reviews, according to top Fed officials.
And Google is planning to pay $1.8 billion for one of the biggest office buildings in Manhattan, according to published reports