Wall Street drops as job gains fuel rate-hike worries

WASHINGTON: U.S. stock indexes fell on Monday on growing concerns that the Federal Reserve will continue to raise interest rates after Friday's jobs data pointed to a resilient labor market.

The tech-heavy Nasdaq <.IXIC> led losses among the major indexes after the long weekend, with growth stocks including Apple Inc (AAPL.O), Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O) slipping between 1.7% and 2.1%.

U.S. employers maintained a strong pace of hiring in March, data on Friday showed, pushing the unemployment rate down to 3.5% and raising odds of the Fed hiking rates one more time next month.

"Investors remain very optimistic that the (rate) increases will come to an end, but the data which the Fed is so dependent on seems to leave room for at least a 25-basis point increase one more time," said Rick Meckler, partner at Cherry Lane Investments.

"One has to step back and look at a bigger picture than just these week-to-week market battles over data. It's going take a few more months to see whether the economic slowdown continues or consumer spending comes back and once again rescues us from a true recession."

Several economic indicators last week, including weak private payrolls and job openings data, had initially raised hopes of a pause to the market-punishing rate hikes amid the recent banking sector turmoil.

However, the odds of a 25-basis point rate hike by the Fed in May rose to more than 65% after Friday's jobs data, according to CME Group's Fedwatch tool, from 57% last week.

The focus this week will shift to U.S. consumer and producer prices data, minutes from the Fed's March meeting and quarterly results from big U.S. banks including JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N).

Analysts expect profits of S&P 500 companies to shrink 5.2% in the first quarter, as per Refinitiv estimates, a reversal from the 1.4% growth forecast at the start of the year.

At 9:41 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 84.51 points, or 0.25%, at 33,400.78, the S&P 500 (.SPX) was down 28.40 points, or 0.69%, at 4,076.62, and the Nasdaq Composite (.IXIC) was down 146.94 points, or 1.22%, at 11,941.02.

Eight of the 11 major S&P sectors were trading lower, with consumer discretionary (.SPLRCD), technology (.SPLRCT) and communication services (.SPLRCL) indexes posting losses of more than 1% each.

Tesla Inc (TSLA.O) fell 4.2% after the electric-vehicle maker cut prices in the United States between 2% and nearly 6%, a move that analysts cautioned could hurt profitability.

First Republic Bank (FRC.N) slipped 1.5% as the lender said on Friday it plans to suspend payments of quarterly cash dividends on its preferred stock "as a measure of prudent oversight".

The KBW Regional Banking index (.KRX) fell 0.3% after Fed data on Friday showed overall credit from U.S. banks declined by a record of more than $120 billion in the latest week, on a nonseasonally adjusted basis.

Pioneer Natural Resources Co (PXD.N) jumped 6.7% after a report that Exxon Mobil Corp (XOM.N) held preliminary talks with the company about a possible acquisition of the shale oil producer.

Chip stocks such as Micron Technology Inc (MU.O) and Western Digital Corp (WDC.O) gained 7.8% and 8.4%, respectively, on Samsung Electronics Co Ltd's (005930.KS) plans to cut chip production.

Declining issues outnumbered advancers for a 1.48-to-1 ratio on the NYSE and 1.74-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and no new lows, while the Nasdaq recorded 13 new highs and 57 new lows.