Stocks tumbled on Friday after government data showed a larger-than-expected drop in July payrolls, increasing expectations of a slow economic recovery.

The S&P 500 turned negative again for the year and fell below its 200-day moving average, now around 1,115, which had earlier provided support.

The U.S. economy lost 131,000 jobs in July -- more than twice the decline of 65,000 that economists forecast, according to a Reuters poll. And the closely watched private employment number rose less than expected.

Consumer stocks ranked among the biggest losers as the monthly jobs report added to worries about consumer spending, which accounts for about two-thirds of economic activity. Retailer Office Depot , which sells school and office supplies, dropped 6.6 percent to $4.56, while the S&P consumer discretionary index <.GSPD> slid 1.6 percent.

Companies and households really have cut back spending, and it has led to the stalling of new hirings, said Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston.

That is going to be with us for some time, and I think markets and investors are grappling with that new reality of higher-than-normal unemployment coming out of the recession.

The Dow Jones industrial average <.DJI> dropped 140.62 points, or 1.32 percent, to 10,534.36. The Standard & Poor's 500 Index <.SPX> fell 15.35 points, or 1.36 percent, to 1,110.46. The Nasdaq Composite Index <.IXIC> lost 28.33 points, or 1.24 percent, to 2,264.73.

The downward turn in the S&P 500's short-term momentum is a bit of a negative, according to Zaro, but he said he won't be concerned if the index pulls back to 1,080 or slightly below it.

But other chartists point out that a close below the 200-day moving average could mean the S&P daily chart generated a double top, which would be seen as a bearish signal by chartists.

In mid-June, the benchmark S&P 500 closed above its 200-day MA for five straight days before a two-week slide that took it down to its 2010 low in early July.

Dow component Kraft Foods Inc bucked the negative tide, gaining 2.1 percent to $30.28 after the company, whose products include Kraft cheese and Maxwell House coffee, reported higher-than-expected quarterly profit. Kraft also raised its target for cost savings from the acquisition of Cadbury, the British company known for its chocolates.

Shares of grain companies like Archer-Daniels-Midland and Bunge continued to outperform the overall market after rallying more than 5 percent on Thursday, on expectations their wheat exports will be increased by Russia's decision to suspend grain shipments as it faces its worst drought in a century.

Bunge edged up 0.2 percent to $54.57, while Archer-Daniels-Midland slipped 0.5 percent to $30.10.

(Editing by Jan Paschal.)

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