Wall Street sells off ahead of jobs report, investors digest Fed comments

US stock market: The three major US stock indexes fell more than 1 per cent each and the S&P 500 had its biggest daily percentage drop since February 13 on Thursday as Federal Reserve officials took a cautious approach in comments on the outlook for interest rate cuts, and investors braced for Friday's US monthly jobs report.

Investors also digested comments from US President Joe Biden, who called for an immediate ceasefire in a call with Israel Prime Minister Benjamin Netanyahu over the Gaza war. Oil prices climbed amid the geopolitical tensions.

All of the major S&P 500 sectors fell on the day, led by a 1.7 per cent drop in technology (.SPLRCT), while defense-related shares like Lockheed Martin (LMT.N) gained. Among the comments by Fed officials, Minneapolis Fed Bank President Neel Kashkari said that at the US central bank's meeting last month he penciled in two rate cuts this year but that if inflation continues to stall, none may be required this year.

Earlier on Thursday, Richmond Fed President Thomas Barkin said the US central bank has "time for the clouds to clear" on inflation before starting to cut rates. On Wednesday, Fed officials including US central bank chief Jerome Powell stuck with a cautious rate-cut strategy. "It's a very careful, measured approach," said Paul Nolte, senior wealth adviser and market strategist for Murphy & Sylvest in Elmhurst, Illinois.

In addition, he said, "there's some nervousness coming into that (jobs) report" on Friday. The Cboe Volatility index (.VIX) posted its highest close since Nov. 1. Stocks were higher early in the day following US jobless claims data that helped to underpin rate-cut hopes. The data showed the number of Americans filing new claims for unemployment benefits increased more than expected last week.

The Dow Jones Industrial Average (.DJI) fell 530.16 points, or 1.35 per cent, to 38,596.98, the S&P 500 (.SPX) lost 64.28 points, or 1.23 per cent, to 5,147.21 and the Nasdaq Composite (.IXIC) dropped 228.38 points, or 1.4 per cent, to 16,049.08.

Friday's jobs data could hold more clues on the labor market and inflation. Economists polled by Reuters expect the nonfarm payrolls for March to fall to 200,000 from 275,000 in February, while the unemployment rate will likely remain steady at 3.9 per cent.

Money markets still currently expect a near 60 per cent chance of at least a 25 basis-point rate cut in June, according to the CME Group's FedWatch tool. On the plus side, Levi Strauss (LEVI.N) shares jumped 12.4 per cent after the apparel maker raised its annual profit forecast, citing savings from its recent cost-cutting measures and fewer discounts.

Volume on US exchanges was 11.99 billion shares, compared with the 11.73 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 1.76-to-1 ratio; on Nasdaq, a 1.69-to-1 ratio favored decliners.

The S&P 500 posted 55 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 108 new highs and 98 new lows.