US STOCKS-Wall Street drops as strong jobs report cools rate cut hopes

* U.S. job growth surges, wage growth remains tepid
* Traders scale back bets on 50bps rate cut in July
* Rate-sensitive bank stocks rise
* Chip stocks weak after Samsung results
* Indexes down: Dow 0.69%, S&P 0.79%, Nasdaq 0.82%

(Changes quote, adds details; updates prices)
By Medha Singh and Sruthi Shankar
July 5 (Reuters) - U.S. stocks lost ground on Friday,
retreating from record levels hit in the previous session, after
strong U.S. job growth in June pushed investors to scale back
bets on aggressive interest rate cuts by the Federal Reserve.
Labor Department data showed nonfarm payrolls rose by
224,000 jobs in June, the most in five months, and solidly
beating economists' expectation of 160,000 additions.
Traders lowered their expectations of a 50 basis point rate
cut by the Fed at its policy meeting on July 30-31, although
hopes remained high that the central bank would start easing
monetary policy. MMT/
"The jobs report showed the economy slowing but not
faltering. That's important because one of the questions going
into the jobs report was what it meant for the possibility of
the Fed cutting rates at the end of the month," said Kate Warne,
investment strategist at Edward Jones in St. Louis.
"They still may do a quarter-point cut as an insurance move,
but this certainly says the data aren't weakening quickly."
Wall Street's main indexes hit a closing record high on
Wednesday on hopes of major central banks embracing looser
monetary policy in the wake of slowing global growth and trade
tensions.
Despite solid hiring numbers, the report also pointed to
persistent moderate wage gains and mounting evidence that the
economy was losing momentum, which could still encourage the Fed
to cut interest rates this month. Shares of banks .SPXBK , which have been under pressure
from falling benchmark debt yields, rose 0.7% and helped drive a
slight 0.1% gain in the financial sector .SPSY , which was the
only major S&P sector in the positive territory.
The defensive sectors - real estate .SPLRCR , utilities
.SPLRCU and consumer staples .SPLRCS - shed more than 1%
each as a rise in U.S. Treasury yields made the dividend-paying
companies less appealing.
At 11:01 a.m. ET, the Dow Jones Industrial Average .DJI
was down 186.45 points, or 0.69%, at 26,779.55, the S&P 500
.SPX was down 23.66 points, or 0.79%, at 2,972.16 and the
Nasdaq Composite .IXIC was down 66.81 points, or 0.82%, at
8,103.42.
Trading volumes are likely to be thin at the end of a
holiday-shortened week as markets were shut on Thursday for
Independence Day holiday.
The Philadelphia chip index .SOX fell 1.3% after Samsung
Electronics Co Ltd 005930.KS forecast a steep plunge in its
second-quarter operating profit, as a supply glut and rising
tariffs hit global demand for electronics. Declining issues outnumbered advancers for a 3.01-to-1 ratio
on the NYSE and a 1.64-to-1 ratio on the Nasdaq.
The S&P index recorded 11 new 52-week highs and no new lows,
while the Nasdaq recorded 24 new highs and 25 new lows.