* Markets slide on jobs data, pull back some on ISM
* S&P 500, oil down but off early lows
* Euro at 1-month high as Greece aid looks likely by July (Updates market activity, prices)
By Barani Krishnan
NEW YORK, June 3 (Reuters) - Wall Street stocks slid on Friday and the dollar tumbled after U.S. jobs growth for May came in way below market expectations, heightening worries that the world's largest economy is in a protracted slowdown.
Other stock markets were flat to down slightly.
However, a report showing encouraging expansion in the U.S. services sector, one of the few bright spots in a week inundated with gloomy data, helped trim losses in equity and commodity markets.
The euro hit a one-month high against the dollar on news that international aid would be available for Greece as early as next month.
Stock and oil prices traded off their lows after the Institute for Supply Management noted a modest recovery in the U.S. services sector in May from April's slump. [ID:nN03252131]
The U.S. Labor Department's monthly report showed the economy adding the smallest number of jobs since September.
"The market sold off hard this morning, but it's coming back a bit," said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Global Investments, which has about $650 billion in assets under management. "I don't think that's a surprise."
"Certainly the jobs number wasn't good. The ISM service number was pretty good," added Phil Orlando, chief equity market strategist at Federated Investors in New York. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on key economic and cyclical indicators
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The Labor Department said the U.S. jobless rate rose to 9.1 percent in May as high energy prices and the effects of Japan's earthquake bogged down the economy.
Closely watched nonfarm payrolls increased 54,000 last month. Private employment rose 83,000, the smallest amount since June, while government payrolls dropped 29,000.
Economists polled by Reuters had expected payrolls to rise 150,000 and private hiring to increase 175,000 in May. The government revised employment figures for March and April to show 39,000 fewer jobs created than previously estimated.
Wall Street's benchmark S&P 500 <.SPX> was down about 0.4 percent by 1:45 p.m. EDT (1745 GMT), after hitting lows from mid-April earlier. For the week, it was poised to close about 2.5 percent lower, marking a fifth straight week of declines.
While some fund managers brooded over the depressing jobs report, others were looking ahead.
"People have come to the conclusion that the economy is in a slow patch right now, and people are trying to figure out how temporary this slower growth is -- whether it's actually a change or a bump in the road for the recovery, and right now it's a bump in the road," said Giri Cherukuri, head trader at Oakbrook Investments in Lisle, Illinois.
Some wondered whether the Federal Reserve will send more cheap money their way to extend support given to markets since the financial crisis.
"It doesn't matter what the reality is, it matters what the perception is, and the perception is that QE3 will at least be debated again instead of being tossed on the fire," said Dennis Gartman, author of a markets commentary letter.
The Fed's $600 billion bond-buying program, known in the market as QE2, is scheduled to end this month. The program had flooded financial markets with dollars since October, driving most of the gains in stocks and commodities.
The Dow Jones industrial average <.DJI> was down 50.18 points, or 0.41 percent, at 12,198.37. The Standard & Poor's 500 Index <.SPX> was down 5.88 points, or 0.45 percent, at 1,307.06. The Nasdaq Composite Index <.IXIC> was down 21.87 points, or 0.79 percent, at 2,751.44.
Global stocks, measured by MSCI's world equity index <.MIWD00000PUS>, steadied from early declines. European shares <.FTEU3> settled down 0.4 percent.
U.S. crude oil
The benchmark 10-year U.S. Treasury note
Ten-year Treasury yields fell below 3 percent this week for the first time since December as investors became wary about the near-term economic outlook.
The euro surged to a one-month high against the dollar after the European Union, the European Central Bank and the International Monetary Fund said the next tranche of international aid for Greece should be available in July.
The single currency climbed as high as $1.45530