Jan 7 (Reuters) - The benchmark S&P 500 and the Nasdaq dropped on Tuesday, weighed down by technology stocks after a batch of upbeat economic data stoked uncertainty among investors about the pace of monetary policy easing that the Federal Reserve could pursue this year.
U.S. stocks gave up early gains after a Labor Department report showed job openings unexpectedly increased in November, while a separate report said services sector activity accelerated in December with a measure tracking input prices surging to a near two-year high.
Signs of continued resilience in the economy have pushed back expectations on when the central bank can deliver its first interest rate reduction this year. Traders now see the cut in May and the Fed staying on hold for the rest of 2025, according to the CME Group's FedWatch tool.
"Businesses anticipate prices rising further in 2025 as a result of tariffs," Bill Adams, chief economist for Comerica Bank, said in a note.
"A mix of solid growth and a new wave of inflationary pressure from tariffs means the Fed will likely switch from cutting interest rates at every decision ... to pausing in between rate cuts in 2025.
At 12:16 p.m. ET, the Dow Jones Industrial Average (.DJI),fell 14.40 points, or 0.03%, to 42,692.16, the S&P 500 (.SPX),lost 39.06 points, or 0.65%, to 5,936.32 and the Nasdaq Composite (.IXIC),lost 281.14 points, or 1.42%, to 19,582.88.
The yield on the 10-year Treasury note rose to 4.68% - its highest level since May - that pushed technology stocks (.SPLRCT),lower by 1.8%. AI-bellwether Nvidia (NVDA.O),fell 5.2%.
Six of the 11 S&P 500 sectors declined with consumer discretionary (.SPLRCD),leading losses with a 1.9% fall. On the other hand, energy stocks (.SPNY),rose 1.5% tracking higher crude prices.
The main focus of the week is the key non-farm payrolls data, along with minutes from the Fed's December meeting.
In the previous session, the S&P 500 (.SPX),and the Nasdaq (.IXIC),closed short of one-week highs on uncertainty after President-elect Donald Trump denied a report that his team was exploring less aggressive tariff policies.
Analysts have said Trump's campaign pledges such as tax cuts, tariffs and loose regulation if implemented could invigorate the economy, although it could increase inflation and slow the pace of rate cuts. His tariff plans if acted upon could also spark a trade war among the country's top partners.
Tesla (TSLA.O),dropped 3.9% after BofA Global Research downgraded the stock to "neutral" from "buy".
Micron Technology (MU.O),rose 4.5% after Nvidia boss Jensen Huang said the chipmaker was providing memory for the AI-bellwether's GeForce RTX 50 Blackwell family of gaming chips.
Citigroup (C.N),added 1.6% on bullish coverage from Truist Securities, while Bank of America (BAC.N),climbed 1.6% after positive ratings from at least three brokerages. Some big banks are expected to report their quarterly earnings in the next week.
Declining issues outnumbered advancers by a 1.74-to-1 ratio on the NYSE and by a 2.01-to-1 ratio on the Nasdaq.
The S&P 500 posted seven new 52-week highs and nine new lows, while the Nasdaq Composite recorded 47 new highs and 45 new lows.
Markets will be shut on Thursday for a national day of mourning to mark the death of former President Jimmy Carter.
Reporting by Johann M Cherian and Sukriti Gupta in Bengaluru; Editing by Arun Koyyur and Maju Samuel
