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No Shelter: 2012 Gains Erased in Torrent of Selling

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Any hope the calendar turning from May to June would change the market's trend were dashed Friday, as stocks started the month with a resounding thud.

Major averages tumbled from the opening bell as a weak U.S. jobs report, sluggish Chinese PMI data and ongoing concerns about Europe proved a toxic brew for those long stocks. (See: May's Jobs Report Disappoints Across the Board)

The Dow (^DJI) closed down 279 points, or 2.3%, and has fallen into negative territory for the year. The S&P 500 (^GSPC) was down 2.5% to 1278, breaking important support at 1284, its 200-day moving average, while the Nasdaq (^IXIC) slid 2.8%.

Treasuries resumed their historic rally as the yield on the 10-year (^TNX) fell to 1.47%, another record low. Commodities such as oil and copper tumbled on fears a global slowdown will crimp demand while gold and silver rallied sharply amid renewed expectation of stimulus programs from global central bankers. (See: Gold Will Rise Again: Mike Pento Sees $1800 By Year-End)

Citing "unknowable" fundamentals, my Breakout colleague Jeff Macke says technicals will continue dominate and predicts today's big breakdown means the S&P is likely to retest its year-end level of 1257. "That's when stocks get interesting...that's where people will look to deploy cash from a trading perspective," he says. "Whether or not that lasts, tell me what Europe's going to do." (For the record, nobody knows what Europe is going to do, which is what's so scary.)

Ever the optimist, our economics editor Dan Gross notes that today's data -- excluding the jobs report -- actually weren't so bad. On the surface, that looks a bit of "other than that, how'd you like the play Mrs. Lincoln"-type analysis. Still, construction spending, ISM manufacturing, auto sales and personal income/spending data were all consistent with an economy growing between 2%-2.5%. (See: Friday's Economic Data Dump Wasn't All Bad News)

Indeed, the U.S. consumer has held up much better than feared given the news out of Europe and, until recently, the high price of gasoline. While the pace is unsatisfying, especially in May, the economy has been adding jobs and there are signs of stabilization in the housing market, which has buoyed consumer spirits.

The question now is whether what's happening on Wall Street will shake consumers' newfound confidence and cause them to pull back again. That may be the prudent thing to do but would only contribute to the downward spiral that seems to be rapidly picking up speed.

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