Wall Street mostly lower Friday as US jobs data may spur rate increase

The Dow and S&P 500 eased on Friday as increasing expectations the Federal Reserve could raise rates as soon as September offset optimism over a recovery in the US labour market.

Stronger-than-expected jobs data for May and a pickup in wages were the latest signs of better momentum in the economy.

Wall Street’s top banks said they expect the Fed to begin raising interest rates in September, followed by another increase before the end of the year, according to a Reuters poll.

"The market is excited about stronger jobs and higher wages, but before (investors) can pop the cork of the champagne bottle, they start thinking about the hangover, which is higher interest rates," said Eric Kuby, chief investment officer at North Star Investment Management in Chicago.

"I think everyone is just waiting to see what happens when rates do start to rise."

The S&P utilities index, which includes top dividend payers that tend to fall as prospects for higher rates rise, was down 1.3 per cent and among the weakest-performing sectors. The US benchmark bond yield hit its highest since October.

S&P financials, which benefit from higher rates, were up 0.6 per cent, among the day’s best performing sectors, while the S&P energy index added 0.7 per cent. Energy shares bounced with oil prices.