(Updates to afternoon trading)

*

August nonfarm payrolls below expectations

*

Broadcom ( AVGO ) up following strong AI revenue growth forecast

*

Indexes: Dow down 0.5%, S&P 500 down 0.5%, Nasdaq down

0.3%

By Caroline Valetkevitch

NEW YORK, Sept 5 (Reuters) -

U.S. stocks fell on Friday on worries about the U.S.

economic outlook after data showed job growth weakened sharply

in August.

Bank shares fell, with the S&P 500 bank index last down

2.3%.

The U.S. economy created 22,000 jobs last month instead of an

estimated 75,000, confirming softening labor market conditions,

according to the Labor Department report.

The three major U.S. stock indexes initially rose and broke

records early in the session, as traders of futures tied to the

Federal Reserve's policy rate boosted bets that the U.S. central

bank will trim rates in quick succession, starting this month,

with a 50-basis-point easing now on the table. However, the

gains soon petered out.

"The payroll report today confirms a softening labor market

and justifies a rate cut at the Fed meeting later this month,"

said Bill Merz, head of capital markets research and portfolio

construction at U.S. Bank Asset Management in Minneapolis.

"The labor market is going to remain a very important

indicator for how this economic picture plays out, but so far

consumer spending has really surprised many people despite

softening in the labor market."

The rate-cut expectations helped to lift the real estate

sector and the Philadelphia Housing Index.

The Dow Jones Industrial Average fell 239.72 points,

or 0.53%, to 45,381.03, the S&P 500 lost 31.30 points, or

0.49%, to 6,470.30 and the Nasdaq Composite dropped

53.41 points, or 0.25%, to 21,652.83.

BofA Global Research also adjusted its outlook following the

report, forecasting one quarter-point cut each in September and

December.

Traders now see an 11.6% chance of a 50-bps rate cut this month

- a stark change from no such bets a month ago, CME's FedWatch

Tool showed.

Shares of Kenvue ( KVUE ) fell about 15% after the Wall

Street Journal

reported

, citing people familiar with the matter without including

evidence, that U.S. Health Secretary Robert F. Kennedy Jr. plans

to announce that use of Kenvue's ( KVUE ) pain medication Tylenol in

pregnant women is potentially linked to autism.

Broadcom ( AVGO ) rose to a record high after the chip

designer forecast fourth-quarter revenue above estimates and

said it expected artificial intelligence revenue growth to

improve significantly in fiscal 2026.

Advancing issues outnumbered decliners by a 1.47-to-1 ratio

on the NYSE. There were 458 new highs and 63 new lows on the

NYSE.

On the Nasdaq, 2,385 stocks rose and 2,095 fell as advancing

issues outnumbered decliners by a 1.14-to-1 ratio.

(Additional reporting by Purvi Agarwal, Ragini Mathur and Medha

Singh in Bengaluru; additional reporting by Johann M Cherian;

Editing by Pooja Desai and Richard Chang)