DJI - NEWYORK, NEW YORK, June 1 (Reuters) - U.S. stocks fell more than 2 percent on Friday, dragging the Dow into negative territory for the year after a dismal U.S. jobs report added to fears that Europe's spiraling debt crisis was dragging down the world economy.
The S&P 500 closed at its lowest since early January and ended below its 200-day moving average for the first time in 2012 after the Labor Department said employers created just 69,000 jobs last month, the weakest in a year.
The bleak May jobs report caps a week of soft economic data from China and growing problems in Europe as Spain's bank crisis deepened.
The global flight to safety pushed U.S. and German government debt yields to record lows while the VIX , a gauge of U.S. stock market anxiety, jumped more than 20 percent for the week.
"The vast majority of investors are choosing to panic," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.
"It's been pretty clear for the last year that Europe was going to be a drag for the global economy."
Though steep, Jacobsen said he would view the pullback as a buying opportunity unless it pushed the S&P 500 below 1,250.
The Dow Jones industrial average fell 274.88 points, or 2.22 percent, to 12,118.57 at the close. The S&P 500 Index dropped 32.29 points, or 2.46 percent, to 1,278.04. The Nasdaq Composite dropped 79.86 points, or 2.82 percent, to 2,747.48.
The benchmark S&P 500 ended below its 200-day moving average, which was 1,284.53 late Friday afternoon.
Friday's decline was the largest daily percentage drop for the S&P 500 since Nov. 9, when a spike in Italian benchmark bond yields sent the broad U.S. stock index down 3.7 percent.
For the week, the Dow fell 2.7 percent, the S&P 500 lost 3 percent and the Nasdaq dropped 3.2 percent.
Financial sector stocks were among the worst hit in Friday's selloff, with the KBW bank index <.BKX> down 4.9 percent, its largest daily drop since early November.
"Most investors don't think the problem in Europe is going to infect the U.S. economy as much as it would the U.S. financial system," Wells Fargo's Jacobsen said.
More than six issues fell for every one that rose on the New York Stock Exchange, while on the Nasdaq, more than five stocks fell for every one that advanced.
Homebuilders ranked among the weakest stocks. Pulte Group plunged 11.8 percent to $8.26 while D.R. Horton lost 8.4 percent to $15.21. The PHLX housing sector index fell 6.3 percent, but it was still up nearly 14 percent for the year.
In one of the few positive moves of the day, Newmont Mining surged 6.7 percent to $50.30 and Barrick Gold added 7.3 percent to $41.91 as the price of gold scored its biggest one-day rise in slightly more than three years.
More than 8.3 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, about 21 percent higher than the year-to-date daily average of 6.85 billion shares.
NYMEX - NEWYORK, NEW YORK, June 1 (Reuters) - U.S. crude oil futures fell on Friday for the fourth day in a row, hitting their lowest levels in nearly eight months and extending losses to a fifth week, as weak U.S. jobs data, soft Chinese manufacturing and the deepening euro zone crisis sparked a broad market selloff.
All the bleak economic news spurred further oil demand worries just a day after U.S. government data showed that domestic crude stockpiles rose for the 10th straight week last week.
Crude oil futures sank with Wall Street, which dropped more than 2 percent. The Dow industrials average <.DJI> crossed into negative territory for the year.
Jobs growth in the United States, the biggest oil consumer, slowed sharply for a third straight month as only 69,000 jobs were added to nonfarm payrolls in May, less than half the number expected and the smallest rise in a year. The unemployment rate ticked up to 8.2 percent from April's 8.1 percent, Commerce Department data showed.
China's manufacturing sector, as measured by its official purchasing managers' index, fell more than expected to 50.4 in May, the weakest level this year and down from its 13-month high hit in April.
In Europe, France and Germany's manufacturing industries contracted at the fastest pace in three years. The same sectors in Italy, Spain and Greece also weakened. Spain and Greece are also trying to grapple with serious financial setbacks.
CBOT SOYBEAN, Nearby soybean futures on the Chicago Board of Trade ended firm on Friday, gaining against back months on firm cash markets and ideas that recent declines were overdone, traders said.
* Spot July soybeans supported by news that CBOT soybean registrations for delivery fell by 352 contracts late Thursday, an indication of strengthening cash markets.
* But back months declined, joining a cross-market sell-off tied to weak U.S. jobs data, poor Chinese manufacturing figures and the euro zone's debt crisis.
* CBOT soybeans unofficially ended the week down about 3 percent on continuous charts, the second straight weekly decline and the fourth in five weeks.
* USDA reported export sales of soybeans in the latest week at 418,800 tonnes (old and new crop years combined), below trade expectations for 450,000 to 700,000 tonnes and the lowest total in four months.
* USDA reported weekly export sales of U.S. soymeal at a net 29,200 tonnes, below trade estimates for 100,000 to 150,000 tonnes. USDA reported weekly soyoil sales at 17,700 tonnes, in line with trade estimates.
* Worries about U.S. crop weather underpin the market. Less-than-stellar conditions are expected over the next few weeks in the U.S. corn and soy region with only light rain and moderate temperatures expected - forecaster World Weather Inc.
* Brazil's soybean farmers, hit hard by drought this year, are laying the groundwork for a record comeback in 2013, buying plenty of seed and fertilizer with healthy revenues from advance sales of next year's crop, which won't be planted for months.
FCPO - SINGAPORE, June 1 (Reuters) - Malaysian palm oil prices dropped to their lowest level in a week on Friday as investors worried about demand from China after weak manufacturing data and Spain's shaky finances, the latest signs that the euro zone debt crisis will further slow global growth.
The decline in China's official purchasing manager's index showed output in the world's second largest economy was cooling, denting the optimism of traders who are betting on firm demand for palm oil ahead of the Muslim fasting month of Ramadan which begin in mid-July.
Traders fretted more after Germany's manufacturing sector contracted at the fastest pace for almost three years and the euro tumbled against the dollar thanks to worries on the Spanish banking sector.
"The palm oil market just lost close to 100 ringgit in one session. People are nervous and forgetting about palm oil's bullish tone," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"I suspect the investors will come in next week for bargain hunting unless there is more gloomy news in store."
The benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange tumbled 3.1 percent to end at 3,006 ringgit ($950) per tonne. It earlier went as low as 3,002 ringgit, a level unseen since May 24.
Reuters analyst Wang Tao kept his bearish target for palm oil prices at 2,993 ringgit per tonne, as its downtrend from an April 10 high of 3,628 ringgit is intact.
Asian palm oil remains firm with cargo surveyors reporting a slight increase in Malaysian exports in May.
The bulk of the orders mostly come from Pakistan and the Middle East where Muslims are getting ready to observe the fasting month starting in mid July, which is followed by another month of feasting.
Stocks are likely to drop for a third month in May, traders say, as exports probably outpaced sluggish production in Malaysia, the world's second largest supplier.
Other global commodity markets also weighed on palm oil. Oil fell below $100 a barrel for the first time since October 2011.
U.S. soyoil for July dropped 1.2 percent in late Asian trade and the most active Jan 2013 soyoil contract on the Dalian commodity exchange lost 1.1 percent. ($1 = 3.1717 Malaysian ringgit)
