Wall Street capped off a fifth straight week of losses on Friday and Treasuries rose as much slower-than-expected U.S. job growth stoked fear that the world's largest economy was in a protracted slowdown.
The euro hit a one-month high against the dollar on news international aid would be available to Greece as early as July, while the U.S. jobs data hurt the greenback against the yen.
Oil prices traded off their lows after the Institute for Supply Management said the U.S. services sector staged a modest recovery last month from April's slump.
But that was not enough to dispel entirely the unease stoked by the U.S. Labor Department's monthly report, which showed the economy added the fewest jobs since September.
The jobless rate rose to 9.1 percent in May as high energy prices and the effects of Japan's earthquake bogged down the economy.
The report "contributed to a growing list of negative data reflecting a definitive soft patch in the U.S. economic recovery," said Michael Woolfolk, senior strategist at BNY Mellon in New York.
"The greater surprise is not that the U.S. slowdown was unexpected, but rather that it was so pervasive, reflected in housing, labor, manufacturing and consumer spending data," he added.
Nonfarm payrolls increased by 54,000 last month. the data showed. Private employment rose by 83,000, the smallest amount since June, while government payrolls fell by 29,000.
Economists polled by Reuters had expected payrolls to rise 150,000 and private hiring to increase 175,000. The government revised employment figures for March and April to show 39,000 fewer jobs created than previously estimated.
Wall Street's benchmark S&P 500 .SPX closed down 12.78 points, or 0.97 percent, at 1,300.16. For the week, it was about 2.3 percent lower, marking a fifth straight week of declines and its worst week since mid-August. The index is down about 5 percent from its late-April high.
"We don't see material downside from here," said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Global Investments, which has $650 billion in assets under management.
"A 5 percent correction (in the S&P) is appropriate for the slowdown we're experiencing, and over the intermediate term, our expectation is that we'll regain some momentum," he said.
Unease about the U.S. outlook boosted the benchmark 10-year U.S. Treasury note . It rose 11/32 for a yield of 2.99 percent.
Ten-year yields fell below 3 percent this week for the first time since December as investors grew anxious about the economy.
While some fund managers brooded over the depressing jobs report, others were looking ahead.
"People have come to the conclusion that the economy is in a slow patch right now, and people are trying to figure out how temporary this slower growth is -- whether it's actually a change or a bump in the road for the recovery, and right now it's a bump in the road," said Giri Cherukuri, head trader at Oakbrook Investments in Lisle, Illinois.
"Certainly the jobs number wasn't good. The ISM service number was pretty good," added Phil Orlando, chief equity market strategist at Federated Investors in New York.
Some wondered whether the Federal Reserve will send more cheap money their way to extend support given to markets since the financial crisis.
"It doesn't matter what the reality is, it matters what the perception is, and the perception is that QE3 will at least be debated again instead of being tossed on the fire," said Dennis Gartman, author of a markets commentary letter.
The Fed's $600 billion bond-buying program, known in the market as QE2, is scheduled to end this month. The program has flooded financial markets with dollars since October, driving most of the gains in stocks and commodities.
The Dow Jones industrial average .DJI closed down 97.29 points, or 0.79 percent, at 12,151.26. The Nasdaq Composite Index .IXIC closed down 40.53 points, or 1.46 percent, at 2,732.78.
Global stocks, measured by MSCI's world equity index .MIWD00000PUS, steadied from early declines. European shares .FTEU3 settled down 0.4 percent.
U.S. crude oil settled above the $100 per barrel mark, down about 0.2 percent on the day. Earlier, it fell 2 percent on worries any further erosion of the U.S. labor market would hurt consumer spending and cut fuel demand.
The euro surged to a one-month high against the dollar after the European Union, the European Central Bank and the International Monetary Fund said the next portion of aid for Greece should be available in July.
The single currency climbed as high as $1.4643, its strongest since May 6. The dollar fell to a one-month low of 80.03 yen.