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European stocks sank as negotiations about Greece’s shaky finances appeared to break down. The fell even more after the U.S. jobs report. Germany’s DAX closed down 3.4 percent and France’s CAC-40 fell 3.6 percent.

Bank of America Corp., the nations' largest bank, sank 8 percent after The Wall Street Journal reported that regulators asked it to develop emergency plans because of its sagging share price and the weakening economy. Bank of America is down 45 percent this year, largely on concerns about legal costs related to shoddy mortgage investments that it sold.

Other big banks dropped on separate reports that the government is preparing to sue some of them, also over mortgage investments they sold that lost value when the housing market collapsed.

The regulator of Fannie Mae and Freddie Mac, government-controlled mortgage agencies, says banks lied about the quality of loans that they pooled. Goldman Sachs Group Inc. and Morgan Stanley fell 5 percent. Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. each lost about 4 percent.

Peter Tchir, a former trader who now runs the hedge fund TF Market Advisors, said stocks will likely be dragged down in the coming weeks by high unemployment, weak spending and a possible default by Greece, which he sees as increasingly likely.

“I expect that the S&P will go back below 1,100 sometime in September,” he said. “Whether we hit a recession or a contraction or not, it’ll remain weak, and Europe is going to hit a wall where the banks are going to have to take losses.” That would also hurt U.S. banks, he said.

Netflix Inc. plunged 9 percent after talks collapsed with a key provider of movies and TV shows. Starz Entertainment said late Thursday that it won’t renew a contract that allows Netflix to stream recently released movies and shows.

The Dow, S&P and Nasdaq all had their worst August since 2001 as economic fears and instability in financial markets and European banks added to investors’ worries.