NEW YORK Stocks ended May with their largest loss in eight months and commodities also took a battering after a spate of worrying U.S. economic data on Thursday hit markets already reeling from Europe's debt troubles.
The euro had its worst performance since September too, repeatedly hitting a near two-year bottom.
U.S. bond yields fell to record lows as fears about Spain's troubled banks and Greece's possible exit from the euro zone spurred a global race for safe assets.
Many investors braced for another round of risk aversion on Friday should the monthly jobs report from the U.S. government contain weaker numbers than preliminary data issued by a payrolls processor on Thursday.
"Europe is the main issue, no question about it, but you have a supporting cast from the U.S. data," said Paul Zemsky, head of asset allocation at ING Investment Management in New York.
Spain remained the focal point of traders on growing speculation that Madrid would sooner or later ask for outside help to bail out its banks. Wall Street pared some of the day's losses on a report -- later denied -- of possible International Monetary Fund aid. But the European Commission has offered direct aid for a euro zone rescue fund to recapitalize distressed Spanish banks and more time for Spain to reduce its budget deficit.
Markets got an inkling of what was to come in Friday's U.S. jobs report after payrolls processor ADP said private employers created 133,000 jobs in May, fewer than the expected 148,000. New claims for unemployment benefits rose by 10,000 for the fourth straight weekly increase, the Labor Department reported.
Investors were dismayed by another report on economic growth and manufacturing in the U.S. Midwest that pointed to a slowdown.
At the close, the Dow Jones industrial average .DJI was down 26.41 points, or 0.21 percent, at 12,393.45. The Standard & Poor's 500 Index .SPX lost 2.99 points, or 0.23 percent, at 1,310.33. The Nasdaq Composite Index .IXIC fell 10.02 points, or 0.35 percent, to 2,827.34.
For the month, the S&P 500 was down 6 percent -- its sharpest loss since September.
European stocks .FTEU3 closed down 7 percent for May and global equities .MIWD00000PUS tumbled 10 percent -- also marking their worst showing since September.
Commodities fell even more, with crude oil futures plunging 15 percent for the month both in London and New York for their biggest loss since December 2008. Copper lost 11 percent for the month.
"There's a lot of instability in the world, and along with the weak economic signals there's going to be significant volatility that I don't expect to end anytime soon," said Don Steinbrugge, managing partner of Agecroft Partners in Richmond, Virginia.
The benchmark 10-year U.S. Treasury note rose 12/32 in price, its yield at 1.578 percent -- down from Wednesday's 1.6 percent levels, which already marked a 60-year bottom.
NO ECB HELP
In Europe, ECB President Mario Draghi ruled out hopes that the central bank would step in to ease the pressure in financial markets as EU leaders grappled with measures to tackle structural problems in the debt crisis.
"Can the ECB fill the vacuum of lack of action by national governments on fiscal growth? The answer is 'No,'" Draghi told the European Parliament. "Can the ECB fill the vacuum of the lack of action by national governments on the structural problem? The answer is 'No.'"
Concerns over Europe's debt crisis and the lack of a clear policy response have been rising since Spain unveiled unconvincing plans to recapitalize nationalized lender Bankia (BKIA.MC), raising the possibility it could need outside help.
Those worries kept Spain's 10-year bond yields at around 6.6 percent, not far from Wednesday's euro-era high of 6.79 percent and close to the crucial 7 percent mark, which has led to troubled nations like Portugal and Ireland needing bailouts.
The euro was last at $1.2358 to the dollar, after setting a 23-month low at $1.2335. The single currency was flat on the day and down nearly 7 percent on the month.
The flight from Spanish debt and Italian bonds, which are under threat of contagion from Spain, has boosted demand for the safety offered by German government paper.
Germany's two-year bonds traded just above zero percent on Thursday, while benchmark 10-year Bund yields hovered around their record low of about 1.25 percent.