June 5 (Reuters) - S&P 500 and Nasdaq futures fell on Friday, as chipmakers lost steam following a strong rally and investors stayed cautious ahead of the May employment report, which could shape expectations for the Federal Reserve's policy path.
Nvidia (NVDA.O), the largest company by market value, fell 1.2%, while Intel (INTC.O), Micron (MU.O), AMD (AMD.O), and Broadcom (AVGO.O), dropped between 1.2% and 2.5% in premarket trading.
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 gains.
"Momentum in AI/Semis feels more shaky," Barclays strategist Emmanuel Cau said, pointing to crowded positioning, looming liquidity events from large IPOs and policy risks.
The spotlight will turn to the Labor Department's data at 8:30 a.m. ET, which is expected to show nonfarm payrolls rose by 85,000 jobs in May, after increasing 115,000 in April, according to a Reuters survey of economists. The pace is likely consistent with a stable labor market.
"So long as the labour market stays in decent shape, that will keep the focus on the inflation side of the Fed's mandate, which has moved increasingly above target given the energy shock," Deutsche Bank strategist Jim Reid said in a note.
The data comes ahead of the new Federal Reserve 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, and a subdued labor market, marked by layoffs and fewer hirings.
Money markets expect the central bank to keep rates unchanged into next year.
Hezbollah rejected a new Lebanon ceasefire, while Israel said it would keep troops in place, dealing a blow to U.S. President Donald Trump's push to end the fighting and advance talks with Tehran.
Citi said it was trimming equity exposure after a strong run. It had taken a bullish call when the Middle East ceasefire took hold in April. It flagged rising inflation and positioning risks, while keeping a constructive longer-term view on U.S. equities supported by AI-driven earnings.
At 06:41 a.m. ET, Dow E-minis were up 70 points, or 0.14%, S&P 500 E-minis were down 29.25 points, or 0.38% and Nasdaq 100 E-minis were down 269 points, or 0.88%.
If losses hold through the session, the S&P 500 (.SPX), 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 the third straight week.
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.
Among other major moves, Lululemon Athletica (LULU.O), slumped nearly 12.5% after the athletic apparel maker cut its annual profit forecast and projected second-quarter earnings well below Wall Street estimates.
Cooper Companies (COO.O), rose 5.6% after the maker of contact lenses beat estimates for second-quarter results.
Meanwhile, S&P Dow Jones Indices will announce the results following its rebalancing after markets close. Chipmaker Marvell
Technology (MRVL.O), which now boasts of more than $270 billion in valuation, is among the contenders to be added to the benchmark index.
Reporting by Medha Singh and Twesha Dikshit in Bengaluru; Editing by Shinjini Ganguli
