US STOCKS-Grim jobs data hammers Wall Street

* June payrolls data fuels worry about recovery

* Broad sell-off hammers market; energy, tech, banks wilt

* Dow off 2 pct, S&P 500 off 2.3 pct, Nasdaq off 2.3 pct

* For up-to-the-minute market news click [STXNEWS/US]
(Updates to late afternoon, changes byline)

By Ellis Mnyandu

NEW YORK, July 2 (Reuters) - U.S stocks plummeted on
Thursday as a worse-than-expected slide in June non-farm
payrolls fanned caution about economic recovery prospects.

News that U.S. employers shed nearly half a million jobs
last month and that the unemployment rate jumped to 9.5
percent, the highest in nearly 26 years, dampened recent hopes
that the recession might be abating. For details, see
[ID:ID:nN01210643]

Investors pummeled stocks broadly, but energy,
industrials, financials, technology and consumer-oriented
shares were among the hardest-hit sectors.

These sectors were at the forefront of the broader
market's recent recovery from the 12-year closing lows of
early March as investors bet that the worst of the economic
slump was over.

At best, the jobs data served as a reality check and
signaled that any recovery will not be smooth sailing,
analysts said.

"Quite frankly, rising unemployment is bad for the entire
economy," said Sasha Kostadinov, portfolio manager at Shaker
Investments in Cleveland, Ohio. "It's not positive for
discretionary stocks. It's not positive for financials --
because there's a direct correlation between the high
unemployment rate and charge-offs and delinquent payments."

The Dow Jones industrial average .DJI sank 173.44
points, or 2.04 percent, to 8,330.62. The Standard & Poor's
500 Index .SPX shed 20.91 points, or 2.26 percent, to
902.42. The Nasdaq Composite Index .IXIC dropped 42.84
points, or 2.32 percent, to 1,802.88.

At the current pace, the S&P 500 was poised for its third
straight weekly drop. But it is still up 33 percent from the
12-year closing low of March 9.

Light volume due to Wall Street's thinly staffed trading
desks accentuated Thursday's sell-off. U.S. financial markets
will be closed on Friday for the U.S. Independence Day
holiday, with July 4th falling on Saturday this year.

On the technology front, International Business Machines
Corp (IBM.N: Quote, Profile, Research) tumbled 2.2 percent to $102.56, making the stock
the Dow's top drag. Apple Inc (AAPL.O: Quote, Profile, Research), another tech
bellwether, slid 1.5 percent to $140.60 and was the Nasdaq's
worst drag.

In the energy sector, Exxon Mobil Corp (XOM.N: Quote, Profile, Research) shed 2.5
percent to $68.82 as U.S. front-month crude CLc1 declined
$2.51, or 3.6 percent, to $66.80 a barrel.

The S&P energy index dropped 3.1 percent.

NRG Energy Inc (NRG.N: Quote, Profile, Research) shares slumped 4.9 percent to
$24.78 after Exelon Corp (EXC.N: Quote, Profile, Research) raised its hostile takeover
bid for the independent power producer by more than 12 percent
to $7.45 billion, ahead of NRG's annual meeting.
[ID:nN02545292]

Among consumer-oriented stocks, department store operator
Macy's Inc (M.N: Quote, Profile, Research) lost nearly 5 percent to $11.16, while the
S&P retail index fell 3.5 percent.

Housing stocks were not spared, with the Dow Jones U.S.
home construction index .DJUSHB down 2.7 percent. The S&P
500's consumer discretionary sector dropped 3.2
percent.

In deal news, healthcare giant Johnson & Johnson (JNJ.N: Quote, Profile, Research)
said it agreed to pay $1 billion for an 18.4 percent stake in
Elan Corp plc (ELN.I: Quote, Profile, Research) and will buy most rights to the Irish
company's portfolio of experimental drugs to treat Alzheimer's
disease. [ID:nL2891369]

Elan's U.S.-traded shares (ELN.N: Quote, Profile, Research) shot up about 13 percent
to $7.90 on the New York Stock Exchange, while J&J's stock, a
Dow component, fell 1.8 percent to $56.04.

Data showing U.S. factory orders were better-than-expected
in May was overshadowed by the bleak news on the labor market.
[ID:nN0220084]
(Editing by Jan Paschal)