Stocks sank on Friday after the economy added fewer-than-expected jobs in May, while a possible new debt crisis in Hungary added to the gloom.

Data showed the U.S. economy added fewer-than-expected jobs last month, with a large portion of those being temporary hirings for the U.S. Census.

There's no other way to describe it except flat out disappointing, said Mike O'Rourke, chief market strategist at BTIG LLC in New York. Once you get beyond the Census numbers, it was abysmal.

Industrial shares, which are sensitive to economic cycles, led the slide. Large manufacturers were among the biggest losers on the Dow, with manufacturer Caterpillar Inc sliding 5.1 percent to $57.98 and conglomerate United Technologies Corp shedding 3.6 percent to $65.44.

The drop in stocks of 3 percent follows Wall Street's first back-to-back advances since late April. Worries that Europe's sovereign debt troubles could spread flared again after a Hungarian official said the country was at risk of a Greek-style crisis, driving the euro to a four-year low against the dollar.

The Dow Jones industrial average <.DJI> dropped 280.00 points, or 2.73 percent, to 9,975.28. The Standard & Poor's 500 Index <.SPX> shed 32.68 points, or 2.96 percent, to 1,070.15. The Nasdaq Composite Index <.IXIC> lost 71.77 points, or 3.12 percent, to 2,231.26.

The CBOE Volatility Index or VIX <.VIX>, Wall Street's favorite barometer of investor fear, shot up 18.1 percent to 34.08 in midafternoon.

Financial stocks ranked among the worst performers, with the KBW Banks index <.BKX> down 3.8 percent. JPMorgan Chase & Co shed 2.5 percent to $38.12, while Bank of America Corp slipped 2.1 percent to $15.48.

Further exacerbating the pressure on Wall Street were concerns from Europe about Societe Generale's derivatives business. The company said it would not comment on market talk about the bank's derivatives operations.

The Labor Department said the U.S. economy added 431,000 jobs in May -- far short of the 513,000 that Wall Street had expected.

Even so, analysts said it didn't alter their view that the economy is stabilizing, with many expecting unemployment will remain high for some time.

There have been nine days since 1998 when payrolls data was reported and the SPDR S&P 500 exchange-traded fund (ETF) opened down 1 percent or more, according to Bespoke Investment Group. On those days, the fund rose an average of 1.2 percent from open to close.

The ETF was down 3 percent on Friday afternoon.

Chris Burba, a short-term market technician at Standard & Poor's in New York, cited a support level for the S&P 500 at 1,070, a recent low for the index. If the S&P closes below that level, he said, The risk of sustaining a decline beneath the February low would increase.

BP Plc began capturing some oil spewing from the ruptured oil well in the Gulf of Mexico. The company also put off a decision on whether to pay its next quarterly dividend as some politicians have demanded. BP's U.S.-listed shares fell 4.4 percent to $37.53.

Decliners were carrying the day, outnumbering advancers on the New York Stock Exchange by a ratio of more than 8 to 1, while on the Nasdaq, about 7 stocks fell on the Nasdaq for every one that rose.

(Reporting by Leah Schnurr; Additional reporting by Caroline Valetkevitch; Editing by Kenneth Barry)