U.S. stocks suffered the biggest loss for the year on Friday as disappointing job data, combined with concerns about the European debt crisis, accelerated the sell-off.

After shedding 275 points or 2.2 percent, its biggest one-day plunge since November, the Dow Jones industrial average closed at 12,118.57 points.

With a gloomy labor market and the uncertainty of the European debt crisis, the U.S. economy could not recover anytime soon.

Will the Federal Reserve step in and do what the investors have longed for -- to unveil a third round of quantitative easing policy, or QE3? Some analysts believe it is likely.

SELL IN MAY BECOMES REALITY

Investors had every reason to expect a prosperous May, as U.S. stocks entered the month with strong confidence. S&P topped 1,400 marks, while the Dow touched the highest level in a month on the first trading day of May.

However, things went in the opposite direction, starting with Greece's political turmoil on May 6, when the election left no party obtaining enough votes for a majority in parliament, resulting in a re-election schedule in mid-June.

Greece's political uncertainty raised investors' concerns about the country's possible exit from the eurozone.

Meanwhile, Spain's banking sector sent another warning sign to the market that Bankia, the country's fourth biggest bank, is battering with a liquidity shortage crisis.

Bankia had received in May the country's biggest-ever bank bailout, 23.5 billion euros (29.1 billion U.S. dollars), and will obtain 4.5 billion euros (5.6 billion dollars) from the state bank rescue fund in June.

The euro refreshed a 22-month low against the dollar in the last few trading days last month, which reflected that investors are losing faith on the shared currency.

The market was pressured by the worry about the European debt crisis for the whole month, as the Dow lost a total of more than 6 percent, and the S&P 500 and the Nasdaq indices tumbled even more.

When investors hoped to get relief from the U.S. economy, the data let them down.

The most anticipated non-farm payroll report showed the economy only added 69,000 jobs, far fewer than previously anticipated, while the unemployment rate ticked up to 8.2 percent.

Other economic data even deepened investors' concerns on the world's biggest economy. The U.S. consumer confidence dropped to a four-month low in May.

Panic prevailed in the markets.

The yields of U.S. 10-year Treasury Notes dropped to a new historical low of below 1.5 percent, while energy prices hit three-year lows and metals including gold surged.

The Chicago Board Options Exchange Volatility Index, widely considered as the best gauge of fear in the market, surged more than 10 percent to close above 26.

"We're seeing the markets pricing in a synchronized global slowdown," said Joe Quinlan, the chief market strategist at U.S. Trust.

WILL QE3 COME?

From the prospective of some analysts, another round of quantitative easing is possible.

Desperate investors turn their eyes to the Fed, as they could neither feel certain in the European situation nor comfortable with the U.S. economy.

"This puts the Fed firmly in play and they will likely feel compelled to respond," said Tom Porcelli, the chief U.S. economist at RBC Capital Markets in New York, after data on Friday showed U.S. job growth last month was the weakest in a year.

Whenever the market could not recover by itself, the Fed was always the first to be turned to.

A poll, conducted by Reuters, suggested that 15 dealers believed a 35-percent chance of the Fed would extend its simulative operating twist at its next monetary policy meeting scheduled on June 19.

The poll also showed that the number of the dealers, who were expecting further quantitative easing, rose from 33 percent to 50 percent in May.

Since QE3 would be too much of a deal, some analysts brought up the Operation Twist, which is a "tricky" way of the Fed to lower the long term interest rate by not adding new liquidities to the market.

However, some argued the Operation Twist was not likely to be implemented again, giving that the Fed had already sold large amount of short-term government bonds.

"'Operation Twist' can not go on forever as there are only so many short term securities in inventory. It can be extended, but must end sooner or later," Stephen J. Guilfoyle, an U.S. Economist from Meridian Equity Partners Inc. told Xinhua. "The average maturity on the Fed's balance sheet is already over 100 months, and that was the target of 'Operation Twist.'"

"Barring something like that though, I would think that a QE3 aimed at mortgage backed securities that increases money supply would be likely," he added.

"U.S. equities are supported by the perceived 'Bernanke Put' as equity markets assume QE3 will be made available should growth deteriorate further," said Sam Stovall, the chief equity strategist at Standard & Poor's.