Jobless data sends stocks reeling; Dow loses 223

Overseas markets also fell Thursday after a report showed unemployment in Europe rose to a 10-year high in May.

As stock prices fell across the board, other signs of investor unease emerged. Treasury prices rose, driving the yield on the 10-year note down to 3.50 percent from 3.54 percent late Wednesday.

Meanwhile a gauge of volatility in the stock market, the Chicago Board Options Exchange Volatility Index, or VIX, jumped 1.73, or 6.6 percent, to 27.95 Thursday afternoon.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange.

Consolidated volume came to a relatively low 3.56 billion shares ahead of the holiday weekend, compared with 4 billion shares traded a day earlier. Light volume can lead to more volatile swings in trading.

Markets will be closed Friday in observance of the Independence Day holiday.

For the week, the Dow finished down 1.9 percent; the S&P 500 lost 2.5 percent; and the Nasdaq fell 2.3 percent.

An upbeat report about May factory orders was not enough to boost traders' confidence amid the weak employment numbers. The Commerce Department said total orders rose 1.2 percent in May, better than the 0.8 percent increase that economists had expected.

Markets kicked off the third quarter on Wednesday with gains as investors found encouragement in a report showing more stable manufacturing activity and another indicating the fourth straight monthly rise in pending home sales.

Next week, the focus will shift to companies' quarterly earnings, which kick off Wednesday with a report from aluminum producer Alcoa Inc.

The dollar rose against most other major currencies, while gold prices fell.

The Russell 2000 index of smaller companies fell 20.25, or 3.9 percent, to 497.21.

Overseas, Japan's Nikkei stock average fell 0.6 percent. Britain's FTSE 100 fell 2.5 percent, Germany's DAX index declined 3.8 percent, and France's CAC-40 fell 3.1 percent.

The Dow Jones industrial average closed the week down 157.65, or 1.9 percent, at 8,280.74. The Standard & Poor's 500 index fell 22.48, 2.5 percent, to 896.42. The Nasdaq composite index fell 41.70, or 2.3 percent, to 1,796.52.

The Russell 2000 index, which tracks the performance of small company stocks, fell 16.01, or 3.1 percent, for the week to 497.21.

The Dow Jones U.S. Total Stock Market Index — which measures nearly all U.S.-based companies — ended at 9,201.07, down 216.44, or 2.3 percent, for the week. A year ago, the index was at 12,842.33.