* Indexes down: Dow 0.25%, S&P 0.85%, Nasdaq 1.39%

* Semiconductors slide after strong rally

* U.S. jobs increase more than expected in May

* S&P Global to not change index entry eligibility for

megacap IPOs

(Updates after market open)

By Medha Singh and Twesha Dikshit

June 5 (Reuters) - Wall Street's major indexes fell on

Friday, as chipmakers lost steam following a sharp rally, while

a stronger-than-expected monthly jobs report raised expectations

of a hawkish monetary policy.

Nonfarm payrolls rose by 172,000 jobs in May after

increasing 115,000 in April. The numbers were also much higher

than the 85,000 forecast by a Reuters survey of economists.

Money markets now see a 98% chance that the U.S. Federal

Reserve will hike interest rates by 25 basis points before the

end of the year, up from a nearly 60% expectation before the

data.

The data comes ahead of new Fed Chair Kevin Warsh's first

policy meeting later this month, as he takes charge of an

economy grappling with elevated inflation, partly exacerbated by

the Middle East conflict.

"You're not talking about a labor market that's doing

fabulous, but you're also not looking at a labor market that's

completely crumbling," said Mark Malek, chief investment officer

at Siebert Financial.

"It's healthy for the market to pull back a little bit and

slow down."

Nvidia ( NVDA ), the largest company by market value, lost

2.5%, while Intel ( INTC ), Micron, AMD and

Broadcom ( AVGO ) dropped between 4.2% and 6.2%.

Tech shares declined for a third straight session,

falling 2.5%. The Philadelphia SE Semiconductor index

tumbled over 5%.

Gains in semiconductor stocks were instrumental in Wall

Street's recovery from March lows to record highs. A temporary

ceasefire in the Middle East and strong earnings growth also

supported the advances.

Six of 11 major S&P 500 indexes moved higher, with consumer

staples leading the gains, as investors rotated money

into other sectors.

At 09:43 a.m. ET, the Dow Jones Industrial Average

fell 128.36 points, or 0.25%, to 51,433.57, the S&P 500

lost 64.63 points, or 0.85%, to 7,519.68 and the Nasdaq

Composite lost 374.02 points, or 1.39%, to 26,456.94.

If current losses hold, the S&P 500 would register

its first weekly decline since April. The tech-heavy Nasdaq was

also set to end the week slightly lower, while the

price-weighted Dow was on track to rise for a third straight

week.

Talks between the U.S. and Iran remained stalled heading

into the weekend, underscoring complications facing a peace deal

to end the conflict.

Citi said it was trimming equity exposure after a strong

run, flagging rising inflation and positioning risks. It kept a

constructive longer-term view on U.S. equities supported by

AI-driven earnings.

Among market movers, Lululemon Athletica ( LULU ) slumped 8%

after the athletic apparel maker cut its annual profit forecast

and projected second-quarter earnings well below Wall Street

estimates.

Cooper Companies ( COO ) rose 6.4% after the maker of

contact lenses beat estimates for second-quarter results.

S&P Global said it would not change the eligibility

requirements for its major indices, which effectively rules out

a swift entry for Elon Musk's SpaceX to the benchmark S&P 500

after it goes public in what would be the world's biggest IPO.

Meanwhile, S&P Dow Jones Indices will announce the results

following its rebalancing after markets close. Chipmaker Marvell

Technology, which now boasts over $270 billion in

valuation, is among the contenders to be added to the benchmark

index.

Declining issues outnumbered advancers by a 2.04-to-1 ratio

on the NYSE, and by a 2.11-to-1 ratio on the Nasdaq.

The S&P 500 posted 7 new 52-week highs and 2 new lows, while

the Nasdaq Composite recorded 27 new highs and 38 new lows.

(Reporting by Medha Singh and Twesha Dikshit in Bengaluru;

Editing by Shinjini Ganguli)