* May payrolls report far weaker than expected
* Hungary raises specter of Greece, bank shares fall
* BP avoids decision on paying dividend
* Dow off 3.2 pct, S&P off 3.4 pct, Nasdaq off 3.6 pct
* For up-to-the-minute market news see []
(Updates to close)
By Leah Schnurr
NEW YORK, June 4 (Reuters) - U.S. stocks cascaded to their
lowest close since February on Friday after May's jobs figure
slammed investors already reeling from worry over another
developing debt crisis, this time in Hungary.
Data showed the U.S. economy added fewer-than-expected
jobs last month, with a large portion of those being temporary
hirings for the U.S. Census. Investors rapidly reversed bets
made during the week as expectations for a blowout number
grew, leading up to the report. For details, see
[]
Wall Street, which is down 12.5 percent since the April 23
closing high for the year, sold off broadly, led by
economically sensitive sectors, including industrials,
technology and small-caps, on concerns that the economy will
recover by fits and starts.
"It was extremely disappointing," said Robert Froehlich,
senior managing director of The Hartford Mutual Funds in
Simsbury, Connecticut.
"We know that employment is the lagging indicator, but ...
we've been saying that for a year. There comes a time where
we're really going to have to see that number pick up."
The drop in stocks follows Wall Street's first
back-to-back advances since late April. Worries that Europe's
sovereign debt troubles could spread flared again after a
Hungarian official said the country was at risk of a
Greek-style crisis, driving the euro <EUR=> to a more than
four-year low against the dollar. []
The Dow Jones industrial average <> dropped 323.31
points, or 3.15 percent, to 9,931.97. The Standard & Poor's
500 Index <.SPX> lost 37.95 points, or 3.44 percent, to
1,064.88. The Nasdaq Composite Index <> tumbled 83.86
points, or 3.64 percent, to 2,219.17.
The CBOE Volatility Index or VIX <.VIX>, Wall Street's
favorite barometer of investor fear, shot up 20.43 percent to
35.48.
"The new worry over Hungary is rekindling sovereign debt
issues. The additional uncertainty is naturally lighting a
fire beneath the VIX as premiums on options boost volatility,"
said Andrew Wilkinson, senior market analyst at Interactive
Brokers Group in Greenwich, Connecticut.
Large manufacturers were among the Dow's biggest losers,
with manufacturer Caterpillar Inc <CAT.N> sliding 5.5 percent
to $57.76, and conglomerate United Technologies Corp <UTX.N>
dropping 4 percent to $65.13.
For the week, the Dow lost 2 percent, the S&P 500 fell 2.3
percent, and the Nasdaq shed 1.7 percent.
Financial stocks also ranked among the worst performers,
with the KBW Banks index <.BKX> down 4.4 percent. JPMorgan
Chase & Co <JPM.N> slid 3.5 percent to $37.75, while Bank of
America Corp <BAC.N> fell 2.9 percent to $15.35.
Decliners carried the day handily, outnumbering advancers
on the New York Stock Exchange by a ratio of more than 9 to 1,
while on the Nasdaq, nearly eight stocks fell for every one
that rose.
Further exacerbating the pressure on Wall Street were
concerns from Europe about Societe Generale's <SOGN.PA>
derivatives business. The company said it would not comment on
market talk about the bank's derivatives operations.
[]
The Labor Department said the U.S. economy added 431,000
jobs in May -- far short of the 513,000 that Wall Street had
expected. The unemployment rate dropped to 9.7 percent in May
from 9.9 percent in April.
Even so, analysts said it didn't alter their view that the
economy is stabilizing, although gradually, with many
expecting unemployment will remain high for some time.
"We interpret it that this is confirmation that we are not
going to have a V-shaped type recovery, but are in a below-
average recovery," said Hank Smith, chief investment officer
of Haverford Trust Co. in Philadelphia.
"We think it will morph into a sustainable expansion,
albeit below average."
The S&P 500 fell below 1,070, which had been considered a
support level for the market. The index closed just below the
intraday low the market reached during the so-called "flash
crash" on May 6.
BP Plc <BP.L><BP.N> began capturing some oil spewing from
the ruptured oil well in the Gulf of Mexico. The company also
put off a decision on whether to pay its next quarterly
dividend as some politicians have demanded. BP's U.S.-listed
shares fell 5.3 percent to $37.16. []
(Reporting by Leah Schnurr; Additional reporting by Doris
Frankel in Chicago; Editing by Jan Paschal)
