(For a Reuters live blog on U.S., UK and European stock

markets, click or type LIVE/ in a news window.)

*

Nonfarm Payrolls increase 272,000 in May versus 185,000

forecast

*

GameStop ( GME ) slides on likely stock offering, quarterly sales

drop

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Nvidia falls; market cap back below $3 trillion

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Lyft ( LYFT ) gains after forecasting annual growth in bookings

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Indexes down: Dow 0.02%, S&P 0.17%, Nasdaq 0.29%

(Updated at 9:45 a.m. ET/13:45 GMT)

By Lisa Pauline Mattackal and Johann M Cherian

June 7 (Reuters) -

Wall Street's main indexes dropped on Friday after a much

stronger-than-expected employment report signaled that the labor

market remains robust, dimming hopes of a September start to

policy easing by the U.S. Federal Reserve.

The Labor Department's report showed

Nonfarm Payrolls

rose by 272,000 jobs in May, against expectations of an

increase of 185,000. Average hourly earnings rose 0.4% on a

monthly basis, compared to an expectation of 0.3% growth.

Interest rate traders slashed bets on a September rate

reduction, now seeing a roughly 56% chance, versus 68% before

the data, according to the CME's FedWatch tool.

"It's the type of report that's not going to cause the

Fed to want to change the course that it has been on, which is

to describe the need for higher interest rates and the potential

for strong job creation to keep upward pressure on inflation,"

said Brian Nick, senior investment strategist at The Macro

Institute.

However, the unemployment rate rose to 4%, versus an

expected 3.9%. Nonfarm Payroll numbers for April and March, too,

were revised lower.

"The fact that you have these two figures, saying such

different things, makes it very hard for investors and even

harder for central bankers to know exactly what's going on,"

Nick said.

All eight S&P 500 sectors were in decline, led by

rate-sensitive real-estate stocks. The small-cap

Russell 2000 index dropped

0.7

% to a one-month low, while the PHLX Housing Index

fell

1.4

%.

Friday's numbers pointed to underlying strength in the

U.S. labor market, offsetting a string of data over the past two

weeks that indicated potential weakness and caused investors to

increase bets on a September rate cut.

Among individual names, GameStop ( GME ) dropped 1.7% in

volatile trading after announcing a potential stock offering and

a drop in quarterly sales. The retailer's shares after stock

influencer "Roaring Kitty" looked set to return to YouTube.

Other so-called meme stocks also fell, with AMC

Entertainment ( AMC ) and Koss Corp ( KOSS ) down 2.4% and 4.3%,

respectively. Retail-focused trading platform Robinhood

gained 1.0%.

At 9:45 a.m. ET, the Dow Jones Industrial Average was

down 9.24 points, or 0.02%, at 38,876.93, the S&P 500 was

down 9.05 points, or 0.17%, at 5,343.91, and the Nasdaq

Composite was down 49.22 points, or 0.29%, at 17,123.91.

Still, all the three indexes were on track for a weekly

rise, underpinned by gains logged earlier in the week.

Meanwhile, AI darling Nvidia slipped 1.8%, on

track to extend the previous session's losses, with its

valuation again dipping below the $3 trillion mark.

The chipmaker's highly anticipated 10-for-1 share split

is due after markets close and could make the more-than-$1,000

stock cheaper for investors.

Lyft ( LYFT ) shares rose 5.3%, following a forecast of 15%

annual growth in its gross bookings through 2027 after markets

closed on Thursday.

Declining issues outnumbered advancers

by

a

4.00-to-1 ratio on the NYSE

, and

by a

2.73-to-1 ratio on the Nasdaq

.

The S&P index recorded seven new 52-week highs and five

new lows, while the Nasdaq recorded

11

new highs and

54

new lows.