Stocks closed Thursday's volatile session lower, as investors focused on Europe's mounting credit problems.
Spain is in the center of the latest developments as markets judged the Madrid government would sooner or later have to ask for outside help to bail out its banks. A report, later denied, of possible plans to help Spain deal with its banking crisis helped Wall Street cut its losses.
"What's missing is a mechanism where the entire continent is exposed to the (debt of) individual countries," said Jim Russell, chief equity strategist for U.S. Bank Wealth Management in Cincinnati. "This type of solution is becoming more popular and more credible."
Equities fell on reports that showed private payroll growth accelerated only slightly last month and claims for jobless benefits rose last week, suggesting the labor market recovery was stalling.
"Europe is the main issue, no question about it, but you have a supporting cast from the U.S. data," said Paul Zemsky, head of asset allocation at ING Investment Management in New York.
The labor data came a day ahead of the U.S. government's monthly payrolls report. A disappointing number in Friday's report could bring back talk of further stimulus from the Federal Reserve.
In other data, the Commerce Department said first-quarter economic growth in the United States was slightly slower than initially thought and the Institute for Supply Management-Chicago business barometer fell in April to its lowest level since September 2009.
Facebook Inc shares hit a fresh low of $26.83 before bouncing back to close up 5 percent. The social networking company has fallen in six of its eight trading sessions.
Reuters contributed to this report.