US stocks and the euro slid on Thursday as new stimulus measures by major central banks failed to spur confidence, with investors keenly awaiting the monthly US jobs report for signs of whether the European debt crisis is weighing on the US recovery.
In expected moves, the European Central Bank cut its main interest rate to a record low and the Bank of England announced it would buy 50 billion pounds of assets with newly created money, while China surprised investors with a cut in its lending rate for the second time in two months.
But euphoria over those measures, which initially drove European equities to a two-month high, had faded by the time Wall Street opened. US stocks on Tuesday had marked their biggest three-day rally of the year; US markets were closed on Wednesday for the Independence Day holiday.
Tom Alexander, head of Alexander Trading in Savannah, Georgia, called the stimulus actions "desperate."
The central banks "are trying to put a finger in this giant dike of debt and they really don't know what to do or how to do it," he said.
As the day progressed, investors were asking if the US Federal Reserve would launch new stimulus measures that might - for a change - get Wall Street up and running again?
"If we get a couple of more bad jobs reports, it will come in with more stimulus," said John Canally, investment strategist at LPL Financial in Boston.
"Today's reports suggest they might hold off," he said.
US private employers added 176,000 new workers to their payrolls last month, the ADP National Employment Report showed on Thursday , after increasing 136,000 in May.
Initial claims for state unemployment benefits dropped 14,000 to a seasonally adjusted 374,000 last week, the Labor Department said in a separate report. The four-week average for new claims, a better measure of labor market trends, fell 1,500 to 385,750.
The US Labor Department's closely watched monthly jobs report to be released on Friday is expected to show a slight increase in hiring at best.
News that the pace of growth in US services sector slowed to a 2-1/2-year low in June had more impact on investors already fearing the euro zone debt crisis was sapping growth - encouraging them to take profit on a rally that ran from Friday through Tuesday.
"The genesis of the economic decline we're seeing is Europe. It is spilling everywhere," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
The Dow Jones industrial average closed down 47.15 points, or 0.36%, at 12,896.67. The Standard & Poor's 500 Index fell 6.44 points, or 0.47%, at 1,367.58. The Nasdaq Composite Index ended off 0.04 points, or 0.00%, at 2,976.12.
Financial stocks weighed on Wall Street, with Dow component JPMorgan Chase
The S&P Financial index and the KBW Banks index fell about 1.5%. Financial shares have often taken the brunt of selling during the European crisis, though they experienced a good run during the recent rally.
The FTSEurofirst 300 index of leading European shares settled down 0.1% at 1,044.47, For the week, though, it still showed a gain of about 1.8%.
The MSCI world equity index, which gained briefly on the Chinese rate cut, ended down 0.6% at 314.33.
The euro slumped against a range of currencies, hitting a one-month low against the dollar. It was last down 1.09% against the dollar at $1.2390, after falling as low as $1.2362.
In commodities, metals markets, including gold, tracked the weak sentiment on Wall Street, while oil was helped only partially by Norway's prolonged oil workers' strike.
Agricultural markets gave investors a rare reprieve from the gloom and doom. Corn prices surged to a 2012 high, and soybeans neared their 2008 record peaks on fears of crop damage from drought.
Concerns over Europe returned to the fore as Spain found it had gained little benefit from last week's EU deal to help lower its borrowing costs.
Madrid was forced to pay the highest rates in over seven months to borrow 10-year funds. Demand was solid at the auction of 3 billion euros of new debt but yields on the longer-dated bonds rose to 6.43%.
The Spanish auction was the first real test of sentiment toward the recession-hit country since European leaders agreed last week to allow the bloc's bailout funds to buy bonds in the secondary markets and directly recapitalize ailing banks.
French borrowing costs held close to historic lows at an auction of 7.8 billion euros of bonds, a day after Paris announced hefty tax rises on the wealthy to plug a revenue shortfall caused by flagging economic growth.
"The market continues to function, but on this evidence there is still no significant change in sentiment or investor demand towards Spanish debt," said Peter Chatwell, a rate strategist at Credit Agricole.
