U.S. stocks closed lower on Friday and the S&P 500 declined for a second straight week after a strong monthly jobs report as investors bet that the Federal Reserve could raise interest rates sooner than previously expected.
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Some of the worst-hit stocks were utilities and real estate investment trusts as they are high-yielding investments which would look less attractive after a rate hike.
The S&P and the Dow, which accelerated their declines as the day wore on, were under additional pressure because they had hit records earlier in the week after a strong February.
U.S. nonfarm payrolls rose 295,000 last month, topping estimates for a gain of 240,000, after a downwardly revised 239,000 increase in January. The unemployment rate fell to 5.5 percent from 5.7 percent in January.
The strong report, seen as a gauge for the timing of the Fed's first rate hike in years, may put pressure on the Fed to move soon, said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.
"You have to think that report makes the likelihood of a June rate increase somewhat higher," said Frederick.
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The S&P extended its losses as the session wore on having found little support after it fell below its two-week intraday low, according to Frank Cappelleri, technical market analyst at Instinet, a Nomura company, in New York.
The Dow Jones industrial average <.DJI> fell 278.94 points, or 1.54 percent, to 17,856.78, the S&P 500 <.SPX> lost 29.78 points, or 1.42 percent, to 2,071.26 and the Nasdaq Composite <.IXIC> dropped 55.44 points, or 1.11 percent, to 4,927.37.
For the week, the S&P 500 fell 1.6 percent while the Dow slid 1.5 percent and the Nasdaq dropped 0.7 percent. The S&P and the Dow both ended the day more than 2 percent lower than their March 2 records. The S&P saw its biggest percentage decline since early January on Friday.
In a shakeup of the Dow Jones industrial average, Apple Inc <AAPL.O>, the largest U.S. company by market value, will join the index this month, replacing AT&T Inc <T.N>. Apple shares rose 0.15 percent at $126.60 after rising as high as $129.37 while AT&T fell 1.5 percent to $33.48.
"If anything, what that should do is cause the Dow to be more volatile," said Schwab's Frederick, because the Dow is a price-weighted index and Apple has a higher share price than AT&T.
The utilities sector <.SPLRCU> was the worst performing S&P 500 sector with a 3.1 percent decline and the Dow Jones Equity Reit Index <.DJR> finished off 3.2 percent.
About 7.2 billion shares changed hands on U.S. exchanges, compared with the 6.4 billion average for the last five sessions, according to data from BATS Global Markets.
Declining issues outnumbered advancing ones on the NYSE by 2,683 to 438, for a 6.13-to-1 ratio on the downside; on the Nasdaq, 1,926 issues fell and 840 advanced for a 2.29-to-1 ratio favoring decliners.
The benchmark S&P 500 index posted 13 new 52-week highs and four new lows; the Nasdaq Composite recorded 67 new highs and 47 new lows.
(By Sinead Carew; Editing by Bernadette Baum and James Dalgleish)