US stock markets end lower as traders eye potential pause in rate hikes

The US stock market ended lower on Monday as investors weighed whether the U.S. Federal Reserve might pause its interest rate hikes at its upcoming policy meeting, while Apple briefly hit a record high before losing ground.

Apple Inc (AAPL.O) ended 0.8% lower after the world's most valuable company unveiled an augmented-reality headset called the Vision Pro, its riskiest and biggest bet since the introduction of the iPhone. Earlier Apple rose as much as 2.2% to an all-time high.

Other heavyweight growth stocks were mixed, with Nvidia Corp (NVDA.O) dipping 0.4% and giving back some of its recent gains, and Tesla Inc (TSLA.O) adding 1.7% after the electric vehicle maker's sales of China-made cars in China jumped in May.

The S&P 500 on Friday closed at its highest level in over nine months after a report showed that wage growth moderated in May.

Following a stronger-than-expected earnings season and expectations the Fed could pause its aggressive monetary tightening cycle, the S&P 500 is up nearly 20% from its closing low in October, lifted by gains in heavyweight tech stocks including Apple, Nvidia and Microsoft Corp (MSFT.O).

Reinforcing expectations the Fed could pause its rate hikes, a survey from the Institute for Supply Management showed the U.S. services sector barely grew in May as new orders slowed, pushing a measure of prices paid by businesses for inputs to a three-year low, which could aid the Fed's fight against inflation.

"That bad news is good news in terms of the Fed. The bad news, meaning weak economic reports, is actually good news because it makes it more likely the Fed will pause its series of interest rate hikes, believing they have begun to do their trick bringing inflation down," said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York.

Traders have priced in a nearly 80% chance that the Fed will hold interest rates at its June 13-14 policy meeting, according to CME Group's FedWatch tool, although they expect another hike in July.

The S&P 500 declined 0.20% to end the session at 4,273.79 points. The Nasdaq declined 0.09% to 13,229.43 points, while Dow Jones Industrial Average declined 0.59% to 33,562.86 points.

Of the 11 S&P 500 sector indexes, seven declined, led lower by industrials (.SPLRCI), down 0.71%, followed by a 0.58% loss in energy (.SPNY).

Palo Alto Networks Inc (PANW.O) climbed 4.4%, with the cybersecurity firm set to replace Dish Network Corp (DISH.O) in the S&P 500 index on June 20. Dish shares fell 2.7%.

Big U.S. banks slipped after the Wall Street Journal reported that U.S. regulators were preparing to tighten rules for large banks, which could include raising their capital requirements by 20% on average.

Declining stocks outnumbered rising ones within the S&P 500 (.AD.SPX) by a 1.5-to-one ratio.

The S&P 500 posted 17 new highs and four new lows; the Nasdaq recorded 90 new highs and 54 new lows.

Volume on U.S. exchanges was relatively light, with 9.7 billion shares traded, compared to an average of 10.5 billion shares over the previous 20 sessions.