(Updated with preliminary closing prices at 04:00 ET/ 2100 GMT)

By Sinéad Carew and Bansari Mayur Kamdar

March 8 (Reuters) -

The S&P 500 and the Nasdaq lost ground on Friday after

touching record highs, with high-flying chip stocks going into

reverse and a labor market report that showed more new jobs than

expected while the unemployment rate also unexpectedly rose.

The S&P and Nasdaq briefly hit intraday record highs but

started to lose steam late morning. The Philadelphia

Semiconductor Index rose to an intraday record and then

retreated to lead declines.

Artificial intelligence chip darling Nvidia ( NVDA ) lost

ground after rising more than 5% and hitting a record high. It

had closed higher for the previous six sessions.

In the chip index, Broadcom ( AVGO ) also sank after its

full-year forecast failed to impress investors and Marvell

Technology ( MRVL ) fell after it forecast first-quarter results

below market expectations on soft demand.

Stocks opened higher after data showed U.S. job growth

accelerated in February, with nonfarm payrolls increasing by

275,000 jobs against an expected 200,000 rise. January jobs

numbers were revised lower.

Also, the unemployment rate rose to 3.9% in February after

holding at 3.7% for three straight months, while wage growth

slowed to 0.1% on a monthly basis.

"Today is just profit taking," said Brian Price, head of

investment management for Commonwealth Financial Network who

described the week as "a microcosm of the year so far" with

modest pull backs and buyers stepping in.

Price pointed to some signs of consumers being more

discretionary in spending, with Costco Wholesale ( COST ) shares

losing ground as quarterly sales fell short of estimates due to

tepid demand for higher-margin goods.

But Price said "the general bias right now is for the market

to continue to move higher, absent negative catalysts."

"That's really what the market is hanging its hat on

right now, that inflation is going to continue to be benign,

that the Fed is going to start to ease."

Next week's February data including consumer prices

(CPI) and retail sales will offer more cues on the prospects for

potential rate cuts.

According to preliminary data, the S&P 500

lost 32.99 points, or 0.64%, to end at 5,124.37 points,

while the Nasdaq Composite lost 185.22 points, or 1.14%,

to 16,085.11. The Dow Jones Industrial Average fell 66.28

points, or 0.17%, to 38,725.74.

"People may be taking some chips off the table. We've

had a decent run. Some of the technology names had moved up

quite a bit," said Charlie Ripley, Senior Investment Strategist

for Allianz Investment Management.

"When you've markets which have run up as much as this has

since the start of the year, with returns coming in a strong as

they have, these types of pull backs are healthy to see."

On Thursday, Federal Reserve Chair Jerome Powell said

the central bank was "not far" from gaining the confidence that

inflation is falling sufficiently to begin cutting interest

rates.

Gap shares rose after the retailer beat Wall Street

expectations for fourth-quarter results, buoyed by strong demand

on improved product offerings at its Old Navy and namesake

brands during the holiday season, and lower markdowns.