June 6 (Reuters) - Wall Street struggled for direction on Thursday as AI-favorite Nvidia slipped after a tech-led rally in the previous session, and investors awaited a key labor market report ahead of the Federal Reserve's meetings next week to decide on interest rates.
The Nasdaq and S&P 500 touched fresh intraday record highs shortly after the open, however, initial gains fizzled out as Nvidia (NVDA.O), opens new tab slipped more than 2%. In the previous session, it had crossed $3 trillion in market valuation and overtaken Apple as the world's second most valuable company.
"Today definitely feels like it's a bit of profit taking or just a breather for a stock that's up 145% year to date," said Dave Mazza, CEO of Roundhill Investments.
Gains in Nvidia and other AI-related players have largely driven Wall Street's rally this year, with the chipmaker accounting for roughly a third of the S&P 500's over 12% year-to-date gains.
Line chart shows the months it took for the market capitalization of Microsoft, Apple and Nvidia since to hit $3 trillion after making the $1-trillion valuation mark.
Line chart shows the months it took for the market capitalization of Microsoft, Apple and Nvidia since to hit $3 trillion after making the $1-trillion valuation mark.
The technology sector (.SPLRCT), opens new tab led declines with a 0.5% dip, while an index tracking chip stocks (.SOX), opens new tab lost 0.8%.
Investors' focus is now on the crucial nonfarm payrolls report, expected on Friday, which they expect to offer further clues on the strength of the labor market and the path for Federal Reserve policy.
A Thursday report from the Labor Department showed jobless claims rose more than expected to a seasonally adjusted 229,000 for the week ended June 1, the latest in a string of reports indicating tightness in the labor market is reducing, giving the Fed more room to cut rates.
Traders see a 68% chance of a September rate reduction, according to the CME's FedWatch tool, and have priced in about two cuts this year, as per data from LSEG. Forecasters polled by Reuters also expect two cuts.
Some market participants also pointed to growing pressure for the Fed with both the European Central Bank and Bank of Canada beginning easing cycles.
"If you get too much divergences among the major economies, it can start to put pressure on different pockets of the economy...it might make something like a (Fed) September cut a little more obvious," said Ross Mayfield, investment strategy analyst at Baird.
Five out of the 11 S&P 500 sectors were in gains, led by a 0.6% rise in consumer staples (.SPLRCS), opens new tab.
Gains in software companies, including a 2.5% rise in Salesforce, helped the Dow outperform.
At 12:08 p.m. ET, the Dow Jones Industrial Average (.DJI), opens new tab was up 20.85 points, or 0.05%, at 38,828.18, the S&P 500 (.SPX), opens new tab was down 4.87 points, or 0.09%, at 5,349.16, and the Nasdaq Composite (.IXIC), opens new tab was down 20.95 points, or 0.12%, at 17,166.95.
Among others, Lululemon Athletica (LULU.O), opens new tab rose 5% after beating expectations for first-quarter profit and revenue on Wednesday.
U.S.-listed shares of NIO (9866.HK), opens new tab dropped 6.5% after the Chinese electric vehicle maker posted a quarterly net loss.
Five Below (FIVE.O), opens new tab slumped 12.9% after the discount store operator trimmed its annual net-sales forecast.
Declining issues outnumbered advancers for a 1.06-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.50-to-1 ratio on the Nasdaq.
The S&P index recorded 20 new 52-week highs and 5 new lows, while the Nasdaq recorded 51 new highs and 68 new lows.
Reporting by Lisa Mattackal and Johann M Cherian in Bengaluru; Editing by Shinjini Ganguli
