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December US job growth beats expectations

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Walgreens set for best day since 1980 after Q1 profit beat

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Constellation Brands ( STZ ) slides after trimming FY forecasts

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University of Michigan survey showed consumer sentiment

dropped

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Indexes off: Dow 1.63%, S&P 1.54% and Nasdaq 1.63%

By Johann M Cherian, Sukriti Gupta and Carolina Mandl

Jan 10 (Reuters) - U.S. stocks sold off on Friday, with

the S&P 500 erasing its 2025 gains, after an upbeat jobs report

stoked fresh inflation fears, reinforcing bets that the Federal

Reserve will be cautious in cutting interest rates this year.

Wall Street's main indexes closed their second consecutive

week in the red.

"We started the year on the wrong foot," said Sam

Stovall, market strategist at CFRA Research, commenting on the

impact of a hotter-than-expected job data on equities. He added

the environment for stocks could become "quite challenging."

The Dow Jones Industrial Average fell 696.75 points,

or 1.63%, to 41,938.45, the S&P 500 lost 91.21 points, or

1.54%, to 5,827.04 and the Nasdaq Composite lost 317.25

points, or 1.63%, to 19,161.63.

The domestically focused small-cap Russell 2000 index

also fell 2.27%, slipping into correction territory as it was

down 10.4% from its Nov. 25 closing high. Wall Street's fear

gauge hit a three-week high on Friday.

A Labor Department report showed job growth unexpectedly

accelerated in December while the unemployment rate fell to 4.1%

as the labor market ended the year on a strong note.

A hotter-than-expected job gain could translate into faster

economic expansion, leading to a rise in prices. To contain a

still-elevated inflation, the Fed could be forced to take a more

conservative stance on rate cuts this year.

Traders see the central bank lowering borrowing costs

for the first time in June and then staying steady for the rest

of the year, according to the CME Group's FedWatch Tool.

Brokerages also revised their Fed rate cut forecasts, with

BofA Global Research forecasting a potential rate hike.

However, Chicago Fed president Austan Goolsbee said there is

no evidence the economy is overheating again, adding he still

expects it will be appropriate to lower interest rates further.

Pressuring stocks, the yield on the 30-year Treasury note

touched 5% - its highest since November 2023, but

slightly retreated to 4.966%.

Most of the 11 S&P 500 sectors declined, except for the

energy index, which rose 0.34%.

Adding to the dour mood, a University of Michigan survey

showed consumer sentiment dropped to 73.2 in January from the

previous month.

Fresh inflation worries have taken the spotlight, compelling

the Fed to issue a cautious forecast on monetary easing last

month, as it anticipates policy changes on trade and immigration

under President-elect Donald Trump, who is expected to take

office in 10 days' time.

On Jan. 15, investors will closely watch the release of the

monthly consumer price index, which could spark further

volatility if it comes in higher than expectations.

"Markets would sell off meaningfully because all of a sudden

the Fed is probably in a position not just to not cut rates and

support markets, but to actually hike rates," said Bryant

VanCronkhite, senior portfolio manager at Allspring.

Chip stocks such as Nvidia ( NVDA ) dropped roughly 3%,

weighed down by a report that the U.S. could announce new export

regulations as early as Friday.

Constellation Energy ( CEG ) soared 25.16% after agreeing to

buy privately held natural gas and geothermal company Calpine

Corp for $16.4 billion, while Constellation Brands ( STZ ) slid

17.09% after cutting its annual sales and profit forecasts.

Walgreens Boots Alliance ( WBA ) jumped 27.55% after

reporting an upbeat quarterly profit.

Declining issues outnumbered advancers by a 4.24-to-1 ratio

on the NYSE and by a 3.32-to-1 ratio on the Nasdaq.

The S&P 500 posted 6 new 52-week highs and 32 new lows while

the Nasdaq Composite recorded 39 new highs and 211 new lows.

Volume on U.S. exchanges was 16.24 billion shares, compared

with the 12.31 billion average for the full session over the

last 20 trading days.