(Corrects final paragraph to show Dow briefly slipped below 10,000 on Thursday, but didn't close there)

NEW YORK - U.S. stocks fell on Friday, failing to recover from the previous day's brutal selloff, after U.S. jobs data pointed to a slow recovery and investors worried about the health of the euro zone's weakest economies.

European policymakers scrambled to reassure markets about the stability of the 16-nation currency bloc, and Portugal backed a law that may push its swollen deficit higher.

Continued worries about the credit situations in Europe, the dollar's strength, the disappointing jobs numbers ... are all building up to a crescendo heading into the weekend, said Tom Schrader, managing director, U.S. equity trading at Stifel Nicolaus Capital Markets in Baltimore.

There is much lack of confidence in the markets.

The Dow Jones industrial average <.DJI> was down 138.15 points, or 1.38 percent, at 9,864.03. The Standard & Poor's 500 Index <.SPX> fell 16.64 points, or 1.57 percent, at 1,046.47. The Nasdaq Composite Index <.IXIC> dropped 23.53 points, or 1.11 percent, at 2,101.90.

The biggest losers included industrial shares, with Boeing Co down 3 percent at $57.51 and General Electric Co off 4.6 percent at $15.30.

U.S. employers unexpectedly cut 20,000 jobs in January, but the unemployment rate dropped to a five-month low of 9.7 percent, the Labor Department reported.

The unemployment data wasn't all that negative. There were some bright spots. But again, it further indicated that the solution to the problem will take a long time to be resolved. said Peter Cardillo, chief market economist at Avalon Partners in New York.

Reflecting investor anxiety, the CBOE Volatility Index <.VIX>, a closely watched measure of Wall Street sentiment, rose nearly 12 percent to 29.13, adding to a 20 percent jump in the previous session.

The euro fell to its lowest level against the dollar since May, as the cost of insuring Greek, Portuguese and Spanish government debt rose to record highs, and investors sought the perceived safe haven of the greenback.

U.S. crude futures fell 3.2 percent, pressured by the rallying dollar, and weighed on energy shares. Exxon Mobil Corp declined 1.2 percent to $63.98. An S&P index of energy shares <.GSPE> slid 2.1 percent.

Some positive notes came from the corporate arena.

U.S. meat producer Tyson Foods Inc reported a much larger-than-expected first-quarter profit. Its stock shot up 4.8 percent to $14.67.

Health insurer Aetna Inc offered signs of a turnaround next year, offsetting a disappointing quarterly profit report and 2010 forecast. The stock dipped 0.2 percent to $29.17.

The Dow industrials briefly slipped below 10,000 on Thursday, with overall stocks suffering their worst daily declines in nine months.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)