US STOCKS-Oil's plunge powers rally on Wall Street

* Oil slides more than $5, falls below $115/barrel

* Three major U.S. indexes up more than 2 percent

* For the week, Dow up 3.6 pct, S&P 500 up 2.9 pct,

Nasdaq up 4.5 pct

* Fannie Mae posts 4th straight quarterly loss (Updates to close)

By Kristina Cooke

NEW YORK, Aug 8 (Reuters) - U.S. stocks soared on Friday rounding out their best week in more than three months, as oil plunged below $115 a barrel, easing inflation concerns and improving prospects for business and consumer spending.

The slide in oil CLc1 prices to their lowest level in three months powered the biggest rally in retailing shares in six years, with Home Depot (HD.N) gaining 7.7 percent.

That eclipsed a steeper-than-expected quarterly loss from mortgage finance company Fannie Mae (FNM.N).

In fact, financials rallied, helped by the view that lower inflation will make it easier for the Federal Reserve to put off interest-rate increases, at a time when the financial sector is still struggling with tighter credit conditions.

"We're at the lowest level in oil prices in months and there is a real feeling that the trend has turned," said Al Kugel, chief investment strategist at Atlantic Trust.

"Lower oil prices are good for businesses and good for consumers, for the inflation picture, and they will improve growth somewhere down the line. So it's 'win win.'"

The Dow Jones industrial average .DJI rose 302.89 points, or 2.65 percent, to 11,734.32, while the Standard & Poor's 500 Index .SPX jumped 30.25 points, or 2.39 percent, to 1,296.32. The Nasdaq Composite Index IXIC gained 58.37 points, or 2.48 percent, to 2,414.10.

For the week, the Dow gained 3.6 percent, the S&P 500 advanced 2.9 percent and the Nasdaq shot up 4.5 percent. It was the best week for all three indexes since April 20.

McDonald's Corp (MCD.N) gave the biggest boost to the Dow after its July sales beat Wall Street's forecasts as its key U.S. market posted its largest gain in five months. Shares of the world's largest fast-food chain rose to an all-time high of $66.24. At the close, McDonald's stock was up 6.2 percent at $65.67 on the New York Stock Exchange.

Concerns about slowing European and Asian economies boosted the dollar and fed worries about lower demand for oil. U.S. front-month crude CLc1 dropped more than $5 inpost-settlement trading to $114.62 a barrel -- more than 20 percent below its July record high.