NEW YORK — Stocks tumbled Friday after the Labor Department said hiring remains weak and Hungary became the latest European country to report its economy is in crisis. Interest rates dropped as investors moved money into the safety of Treasury bonds and notes.
The Dow Jones industrial average dropped 323 points, its third worst slide of the year. The index closed below 10,000 for the second time in two weeks. All the major indexes were down more than 3 percent. The concerns about Hungary pounded the euro to a four-year low.
The drop pushed major stock indexes back into correction mode, meaning a decline of at least 10 percent from recent highs.
Retailers were among the hardest hit stocks after investors bet that a weak job market would discourage consumers from spending. Financial stocks also fell sharply on concerns that borrowers would continue having problems paying their bills. Banks were further hurt by worries about their vulnerability to Europe's increasing troubles.
The government's May jobs report was an unpleasant surprise for investors who had grown a little more upbeat about the domestic economy the past few days. The Labor Department said private employers hired just 41,000 jobs in May, down dramatically from 218,000 in April and the lowest number since January. The news made it clear that the economic recovery isn't yet picking up the momentum that investors have been looking for.
The government said 431,000 jobs overall were created last month, but most of them, 411,000, came from the government's hiring of temporary census workers. The overall number also fell short of expectations. Economists polled by Thomson Reuters had forecast employers would add 513,000 jobs.
"People are looking for one turning point," Daniel Penrod, senior industry analyst for the California Credit Union League, said of the monthly jobs report. "That's not realistic. This growth will be much slower and more gradual than in the past."
The unemployment rate fell to 9.7 percent from 9.9 percent in April. That was slightly better than the 9.8 percent unemployment rate economists had forecast.
The jobs report was the latest in a series this week that showed the economy isn't as robust as hoped. But investors had sent stocks higher as they bet on stronger job growth in May.
Investors were worried that employers' reluctance to hire would further hurt consumers. Investors were already nervous about consumer spending after retailers reported Thursday that their sales were sluggish during May. Clothing retailer stocks were among the big losers after the jobs report Friday as investors bet that shoppers would stick to buying only necessities.
Meanwhile, the spokesman for Hungary's prime minister described the country's economy as being in a grave situation. However, he said, the government is ready to avoid a crisis like the one being faced by Greece, which had to be bailed out by the European Union. Spain and Portugal are also struggling.
According to preliminary calculations, the Dow fell 323.31, or 3.2 percent, to 9,931.97, its steepest drop since May 20. All 30 stocks that make up the index fell.
The Dow is down 11.4 percent from its 2010 peak of 11,205, which came on April 26.
The Standard & Poor's 500 index fell 37.95, or 3.4 percent, to 1,064.88. The index is down 12.5 percent from its 2010 high.
The Nasdaq composite index dropped 83.86, or 3.6 percent, to 2,219.17. It's down 12.3 percent from its high of the year.