(Updates to afternoon, changes byline)
* Stagflation fears rattle market
* Soaring oil, unemployment rate drive broad sell-off
* Big manufacturers, financials, airlines, retailers hit
By Kristina Cooke
NEW YORK, June 6 (Reuters) - U.S. stocks slid on Friday on
renewed fears the U.S. economy faces 1970s-style stagflation
after government data showed the unemployment rate jumped the
most in 22 years in May and the price of oil hit a record.
U.S. crude's <CLc1> dramatic $10 jump -- its biggest
one-day gain in dollar terms in the history of the market --
fueled concerns about inflation and consumers' spending power,
a key driver of economic growth.
Stagflation is a period of slowing growth and rising
inflation.
Oil thundered past a high it hit late last month on
weakness in the dollar and tensions in the Middle East .
General Electric Co <GE.N> and other economic bellwethers
slid after a Labor Department report showed the unemployment
rate rose 5.5 percent in May to its highest since October 2004.
The report also showed the economy shed jobs for a fifth
straight month.
"The biggest let-down is the unemployment rate because now
(Fed Chairman) Bernanke's hands are tied," said Dave Rovelli,
managing director of U.S. equity trading at Canaccord Adams in
New York.
"If Bernanke raises rates to fight inflation, he's going to
really slow down the economy. But if he doesn't raise rates the
dollar is going to go weak and that's why oil is going through
the roof."
The Dow Jones industrial average <> tumbled 326.74
points, or 2.59 percent, to 12,277.71. The Standard & Poor's
500 Index <.SPX> slid 32.32 points, or 2.30 percent, to
1,371.73, while the Nasdaq Composite Index <> fell 59.79
points, or 2.34 percent, to 2,490.15.
Shares of GE, a diversified manufacturer, were the top
drag on the S&P 500, down 2.8 percent at $30.20 on the New York
Stock Exchange. Earlier, GE's stock sank to $30.15, its lowest
level since May 2004.
Plane maker Boeing's shares slid 4.3 percent to $73.97 on
the NYSE.
Financial services companies' shares were another big
casualty, with insurer American International Group Inc <AIG.N>
down 6.9 percent to $33.90.
Shares of JPMorgan Chase & Co <JPM.N>, the No. 3 U.S. bank,
shed 4.1 percent to $40.39. The S&P financial index <.GSPF>
tumbled 3.8 percent.
Shares of consumer-oriented companies also took a beating,
with the S&P retail index <.RLX> down 3.6 percent. Shares of
Wal-Mart Stores Inc <WMT.N> slipped 1.9 percent to $58.66,
giving up some of the gains notched on Thursday on a
stronger-than-expected May sales report.
The surge in crude prices also hurt airline stocks, with
UAL Corp <UAUA.O> down 12.2 percent at $8.88 on the Nasdaq. The
airline index <.XAL> fell more than 6 percent.
The Dow Jones homebuilders index <.DJUSHB> fell to its
lowest since March.
Chevron Corp <CVX.N> was the only Dow component to escape
the sea of red, rising 27 cents to $100.26.
(Additional reporting by Ellis Mnyandu; Editing by Kenneth
Barry)
