*

Retail sales rise 0.4% in October, above forecasts

*

Indexes on track for weekly losses

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Vaccine makers, packaged food cos fall after RFK Jr.

appointment

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Applied Materials ( AMAT ) down after Q1 rev forecast misses

estimates

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Indexes down: Dow 0.73%, S&P 500 1.41%, Nasdaq 2.36%

(Updated prices at 3:03 p.m ET/ 2003 GMT)

By Sinéad Carew and Lisa Pauline Mattackal

Nov 15 (Reuters) - The Nasdaq and S&P 500 were set for

their biggest daily losses in over two weeks on Friday, after

Federal Reserve Chair Jerome Powell pointed to a slower pace of

interest-rate cuts and investors reacted to cabinet selections

by U.S. President-elect Donald Trump.

Powell on Thursday pointed to ongoing economic growth, a

solid job market, and inflation above the Fed's 2% target as

reasons the U.S. central bank can afford to be careful with the

pace and scope of future rate cuts.

As a result, traders increased bets the Fed will not change

rates at its December meeting, pricing in a 38% chance, compared

with roughly 14% a month ago, according to the CME FedWatch

tool. They also dialed back expectations for easing in 2025.

This view was reinforced by this week's news of sticky

inflation and Friday's economic data showing U.S. retail sales

rose slightly more than expected in October, which signaled

economic strength. Import prices also rebounded.

"In the last 48 hours we've had some pretty big changes, not

just from the election but from economic data that was better

than expected and Powell speaking about not having to be as

aggressive on interest rate cuts," said Adam Rich, deputy chief

investment officer for Vaughan Nelson in Houston.

"Market expectations for interest rate cuts have come down

materially and also the market is readjusting after a pretty

bullish reaction to the U.S. election."

All three major U.S. stock indexes were headed for weekly

losses as market focus shifted from the U.S. election to rate

cuts and potential inflation risks under the next

administration.

Stocks of vaccine makers and packaged food companies

also dipped after Trump said he would nominate Robert F Kennedy

Jr, who has spread misinformation on vaccines and criticized

ultra-processed foods, to head the Department of Health and

Human Services.

As of 03:03 p.m. ET, the Dow Jones Industrial Average

fell 318.33 points, or 0.73%, to 43,432.53, the S&P 500

lost 83.78 points, or 1.41%, to 5,865.39 and the Nasdaq

Composite dropped 450.89 points, or 2.36%, to 18,657.10.

Also contributing to volatility on Friday was the regular

expiration of stock and index options, according to Rich.

Since the post-election rally in stocks had reduced

expectations for stock market volatility to multi-month lows,

Brent Kochuba, founder of financial insights company SpotGamma,

said Friday's stock market weakness was partly due to investors

being ill-prepared for a pullback.

CBOE's volatility index, also known as Wall Street's

fear gauge, hit 17.55 on Friday, its highest level since

Election Day on Nov. 5.

Shares of defense firms and government contractors extended

their losing streak after Trump named Elon Musk and former

Republican presidential candidate Vivek Ramaswamy to head a new

Department of Government Efficiency.

Among the S&P 500's 11 major industry sectors information

technology was the biggest decliner, dropping 2.6%.

Rich noted that investors appeared to rotating out of sectors

that worked ahead of the election.

Also, it did not help that the Philadelphia SE Semiconductor

index fell 3.4%. The chip sector lost ground partly in

sympathy with Applied Materials ( AMAT ), which tumbled 9% after

the U.S. maker of chip-manufacturing equipment forecast

first-quarter revenue below Wall Street estimates.

Moderna ( MRNA ) slumped 6.5% and Pfizer ( PFE ) lost 4.8%,

while the healthcare sector dropped 1.9%, hitting its

lowest since May.

The consumer staples index segment was also

impacted by the nomination news, with Monster Beverage ( MNST ) was off

6%, Lamb Weston ( LW ) down 4.6% and PepsiCo ( PEP ) down 4%.

The small-cap Russell 2000 index fell 1.5%, heading

for its fourth consecutive session of declines and biggest

weekly decline in over two months.

Declining issues outnumbered advancers by a 2.19-to-1 ratio

on the NYSE where there were 96 new highs and 100 new lows.

On the Nasdaq, 1,116 stocks rose and 3,118 fell as

declining issues outnumbered advancers by a 2.79-to-1 ratio. The

S&P 500 posted 11 new 52-week highs and 24 new lows while the

Nasdaq Composite recorded 31 new highs and 265 new lows.