NEW YORK — Illustrating the stock market's deep confusion about the economy, bad news about oil prices and jobs sent the Dow Jones industrials tumbling almost 400 points Friday, a day after the index rallied strongly on optimism about jobs and consumer spending.
The sharp reversal reflects a pattern of uncertainty that is leading investors to react frantically to each day's helping of news.
"It goes to show how bipolar the attitude is," said Paul Hickey, co-founder of investment research firm Bespoke Investment Group in Harrison, N.Y. "One day things can be great, and the next day things can be bad."
The Dow plummeted 394.64 points Friday, or 3.1%, to 12,209.81. It was the blue-chip average's biggest drop since February 2007.
Other major indexes suffered similar declines.
The Standard & Poor's 500 sank 43.37 points, or 3.1%, to 1,360.68. The Nasdaq composite index lost 75.38 points, or 3%, to 2,474.56.
The market fell sharply in the morning, after the Labor Department reported that the unemployment rate jumped in May to 5.5%, its highest level since 2004. The half-point increase from 5% in April marked the rate's biggest monthly increase in 22 years. Economists had expected only a tick up to 5.1%.
After absorbing the job news, stocks gradually extended their losses as oil prices ballooned throughout the day.
Crude futures rocketed up $10.75 to settle at $138.54 a barrel, exceeding their record close set two weeks ago. It was the biggest one-day rise in dollar terms in the New York Mercantile Exchange's history.
Oil's rally was triggered in part by an analyst's prediction that crude would hit the $150-a-barrel mark by the Fourth of July.
The stock sell-off was the opposite of Thursday's trading, which boosted the Dow 214 points. Benign economic data and impressive retail sales raised hopes that the economy would sidestep the worst-case scenario.
But that optimism may have set the market up for disappointment. Though the economy shed fewer jobs last month than expected -- 49,000 versus analysts' consensus estimate of 60,000 -- so-called whisper numbers circulating on Wall Street had raised hopes for a better showing.
"That budding optimism in a lightly traded summer market was vulnerable to a correction on bad news," said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Va. "And when the jobs report came in, the market got crunched. The exclamation point was the over $10-a-barrel rise in crude prices."
