US STOCKS-Jobs data hits stocks, but earnings optimism intact

* Non-farm payrolls figure sparks broad selling

* Investors to focus on coming earnings for direction

* Google slumps on downgrade, one of Nasdaq's top drags

* Dow off 0.7 pct, S&P off 0.9 pct, Nasdaq off 0.7 pct * For up-to-the-minute market news see [STXNEWS/US] (Updates to afternoon trading, changes byline)

By Ryan Vlastelica

NEW YORK, July 8 (Reuters) - U.S. stocks dropped on Friday and the Nasdaq looked to end an eight-day winning streak as a weak jobs report dashed hopes the economy was emerging from a soft patch, though the start of earnings season next week kept investors engaged.

U.S. employers hired a mere 18,000 workers in June, the Labor Department said, the fewest number in nine months and far below economists' expectations for a gain of 90,000. The unemployment rate rose unexpectedly in June to 9.2 percent, the highest since December, from 9.1 percent in May.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For details, see [ID:nOAT004829]

For graph of the S&P 500 and the payrolls numbers, http://link.reuters.com/dev52s

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The sell-off was broad as the report dashed expectations that the labor market would show more signs of strength after some encouraging jobs numbers during the week spurred analysts to raise their forecasts, sparking a rally on Thursday.

Despite the day's drop, the three major U.S. stock indexes remained higher for the week. But the U.S. stock market is coming off a string of gains that many investors said was related to investors pricing in an earnings season expected to be strong despite the economic slowdown. Over the past eight sessions, the S&P 500 rose 6.7 percent.

"If you're going to get concerned about the jobs report, you should wait for earnings before going through a complete manic swoon," said Phil Dow, director of equity strategy at Minneapolis-based RBC Wealth Management, which oversees $164 billion.

"Our guess is that we'll see better-than-expected earnings and revenue, and combined with the valuation of the market, this is a compelling time to get in."

The Dow Jones industrial average <.DJI> was down 86.47 points, or 0.68 percent, at 12,633.02. The Standard & Poor's 500 Index <.SPX> was down 11.97 points, or 0.88 percent, at 1,341.25. The Nasdaq Composite Index <.IXIC> was down 21.20 points, or 0.74 percent, at 2,851.49.

Alcoa Inc is scheduled to report results on Monday, and the Dow component's earnings are seen as the unofficial start to the season. Among the other companies on tap to report next week are JPMorgan Chase & Co , Citigroup Inc and Google Inc . Shares of Google slumped 2.5 percent to $532.88 after Morgan Stanley downgraded the Internet giant to "equal-weight," citing margin concerns. [ID:nL3E7I81Z3]

Shares of Monster Worldwide , an online employment agency, sank 3.2 percent to $14.65 on the jobs report and were the biggest percentage loser in the Dow Jones U.S. business training and employment index <.DJUSBE>, which dropped 3.6 percent.

The CBOE Volatility Index <.VIX> or VIX, widely seen as a measure of anxiety on Wall Street, rose 2.4 percent, but was still at a relatively depressed level of 16.33. It is down 28.2 percent from a high reached on June 16.

Banking stocks were among the biggest losers. The S&P's financial index <.GSPF> fell 1.4 percent, pressured by Bank of America , which shed 1.9 percent to $10.71 as the most actively traded stock on the New York Stock Exchange.

Semiconductor stocks sank, with the Philadelphia semiconductor index <.SOX> off 1.9 percent and falling under its 50-day moving average. The index is often seen as a leading indicator for the wider market.

U.S. wholesale inventories rose 1.8 percent in May, the Commerce Department said. The much larger-than-expected increase in inventories created a potential drag on growth in the second half of the year as the job market slows. [ID:nN1E7670GD] (Reporting by Ryan Vlastelica; Editing by Jan Paschal)