Unable to shake their worries about Europe, investors drove stocks to a four-month low Thursday and piled into bonds, sending the yield on the 10-year Treasury note close to an all-time low.
The Dow Jones industrial average posted its 11th loss in 12 days after a pair of discouraging economic reports further unnerved traders already concerned about a possible exit from the euro by Greece.
The Dow lost 156.06 points, most of it toward the end of the trading day, to close at 12,442.49. It is down almost 6 percent for May, and what had been a strong year for stocks has been reduced to a slender 1.8 percent gain.
The Standard & Poor's 500 stock index closed at its lowest point since Jan. 17.
The yield on the benchmark 10-year note hit 1.69 percent. That is lower than any 3 p.m. reading since at least 1953, according to records kept by the Federal Reserve.
According to other financial data providers, including Dow Jones and Bloomberg, the yield on the 10-year dipped slightly lower, to 1.67 percent, at other points in the trading day last September.
"It's still seen as one of the safest investments in the world," said Guy LeBas, chief fixed income strategist for Janney Montgomery Scott. "If you compare Europe's problems to our problems in the U.S., it doesn't look so bad over here."
The dollar and gold both rose as traders sought refuge in lower-risk assets.
Stock indexes opened lower on Wall Street following drops in European markets. The declines accelerated at mid-morning after the Federal Reserve Bank of Philadelphia said manufacturing slowed in the mid-Atlantic region for the first time in eight months. The report was far worse than analysts had been expecting.
In other trading, the Standard & Poor's 500 index fell 19.94 points to 1,304.86, its lowest close since Jan. 17. The Nasdaq composite fell 60.35 points to 2,813.69.
It is not much of a welcome for Facebook, which starts trading Friday in one of the most talked-about debuts in the history of the U.S. stock market.
Facebook set its price at $38 per share, which would raise $18.4 billion for the company and value it at $104 billion _ more than Amazon.com and much more than long-established names like Disney and Kraft.
In Europe, Fitch ratings agency downgraded Greece deeper into junk territory on Thursday and warned that a Greek exit from the euro currency is "probable" if new national elections next month produce an anti-bailout government.
Fitch cut Greece's rating by one notch, from B- to CCC, the lowest possible for a country that is not in default.
Greece swore in a caretaker Cabinet that will hold power at least until next month's election. In elections earlier this month, Greeks gave strong support to politicians who rejected the tough budget cuts that came with the country's financial bailout.
"Europe is very much on investors' minds," said Brian Gendreau, market strategist at broker-dealer Cetera Financial Group. "It's been two years with multiple bailouts involving Ireland, Portugal and Greece, and things don't seem to be getting better."
German, French and Spanish stock markets all fell more than 1 percent.
Spain was forced to pay sharply higher interest rates to raise $3.18 billion in a debt auction Thursday. And shares of Bankia, which Spain nationalized last week, plunged 20 percent on a report from the newspaper El Mundo stating that depositors have withdrawn over $1 billion since last Wednesday.
In the United States, Caterpillar fell 4 percent, most of the 30 stocks in the Dow, after reporting that global sales growth of construction and mining machinery slowed between February and April.
Wal-Mart stock rose over 4 percent, the most in the Dow, after reporting a 10 percent jump in first-quarter income, beating Wall Street expectations.
The Conference Board said its measure of future U.S. economic growth fell in April after six months of increases. The drop came from fewer requests for building permits and a spike in applications for unemployment benefits.
Oil prices continued to trade lower, falling below $93 a barrel and extending a two-week sell-off, as traders worried about the potential impact on global growth from the European crisis. Crude oil has plummeted about 12 percent from $106 two weeks ago.
Energy companies fell. Chesapeake Energy declined over 3 percent, while WPX Energy fell over 4 percent.
_ Media General soared 33 percent after billionaire Warren Buffett's company Berkshire Hathaway agreed to buy 63 newspapers from the company for $142 million.
_ GameStop fell 11 percent after the world's largest video game retailer reported its first-quarter profit fell 9.8 percent, as fewer customers visited its stores and bought new games and systems.
_ Sears Holdings rose 3 percent after the beleaguered retailer turned a profit in the first quarter, benefiting from a gain on the sale of some stores.
AP Business Writer Matthew Craft in New York contributed to this report.