US stocks fell on Friday, slipping from record levels hit in the previous session, as strong US job growth in June pushed investors to scale back bets on aggressive interest rate cuts by the Federal Reserve.
The US Labor Department data showed nonfarm payrolls rose by 224,000 jobs in June, the most in five months, and solidly beating economists' expectation of 160,000 additions.
Traders lowered their expectations of a 50 basis point rate cut by the Fed at its policy meeting on July 30-31, although hopes remained high that the central bank would start easing monetary policy.
"Markets have expected more than one rate cut this year and this solid jobs report puts that into question, if the Fed will cut more than just one time in 2019," said Ryan Nauman, market strategist at Informa Financial Intelligence's portfolio analytics arm Zephyr.
The jobs report also pointed to persistent moderate wage gains and mounting evidence that the economy was losing momentum, which could still encourage the Fed to cut rates this month.
The Fed said in its semi-annual report to Congress that the job market had "continued to strengthen" so far this year, and described recent weak inflation as "transitory".
Shares of banks, which have been under pressure from falling benchmark debt yields in recent weeks, rose 0.8pc and helped drive a 0.4pc gain in the financial sector, which was the only major S&P sector in the positive territory.
The defensive sectors - real estate, utilities and consumer staples - fell between 0.6pc and 0.8pc as a rise in US Treasury yields made the dividend-paying companies less appealing.
However, Friday's losses were not severe enough to erode this week's solid gains that took Wall Street's main indexes to record closing highs on hopes of major central banks embracing looser monetary policy and a temporary truce in U.S-China trade dispute.
At 12:46 p.m. ET, the Dow Jones Industrial Average was down 52.15 points, or 0.19pc, at 26,913.85, the S&P 500 was down 10.49 points, or 0.35pc, at 2,985.33 and the Nasdaq Composite was down 31.04 points, or 0.38pc, at 8,139.19.
Trading volumes are likely to be thin at the end of a holiday-shortened week as markets were shut on Thursday for Independence Day holiday.
Among decliners were healthcare stocks, which fell 0.7pc after a five-day run of gains.
The Philadelphia chip index fell 0.8pc after Samsung Electronics Co Ltd forecast a steep plunge in its second-quarter operating profit, as a supply glut and rising tariffs hit global demand for electronics.
Declining issues outnumbered advancers for a 1.96-to-1 ratio on the NYSE and a 1.40-to-1 ratio on the Nasdaq.
The S&P index recorded 14 new 52-week highs and no new lows, while the Nasdaq recorded 32 new highs and 33 new lows.