Wall Street Falls Amid Reignited Rate Debate

U.S. stocks were modestly lower in early trading on Monday as investors weighed the prospect of the Federal Reserve raising interest rates as soon as September, after Friday's strong jobs report.

While the Fed is broadly expected to raise rates this year, the timing of the move has kept the market on tenterhooks as the central bank studies data for signs of a healthier economy.

The stronger-than-expected jobs data for May and a pickup in wages were the latest signs of improved momentum in the economy, prompting expectations of a rate hike coming sooner rather than later.

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

"I think we'll see a lot more back and forth for a while," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

"There are concerns that the Fed will be more aggressive regarding the timing of the hike and a steeper hike following the first one."

The dollar retreated after a report – later denied – that President Barack Obama had expressed concern over its strength after a year-long rally.

At 9:46 a.m. ET the Dow Jones industrial average <.DJI> was down 25.73 points, or 0.14 percent, at 17,823.73, the S&P 500 <.SPX> was down 2.82 points, or 0.13 percent, at 2,090.01 and the Nasdaq Composite <.IXIC> was down 9.22 points, or 0.18 percent, at 5,059.24.

Six of the 10 major S&P sectors were lower, with the energy index <.SPNY> leading the losses with a 0.29 percent drop. Oil prices fell on news of a slide in China's fuel imports and OPEC's decision to maintain its production target.

Tesla <TSLA.O> rose 2.7 percent to $255.88 after plans for its Gigafactory got a boost from Panasonic's <6752.T> move to start sending its employees to the plant, with manufacturing expected to begin next year.

Dow component McDonald's <MCD.N> was marginally higher at $95.50 after the company posted a smaller-than-expected decline in worldwide sales at established restaurants in May.

Sears Holdings' <SHLD.O> shares fell 1.8 percent to $40 after its quarterly sales continued to tumble.

American Airlines <AAL.O> fell 1.4 percent to $41.14 after its CEO voiced concern about the risk that capacity growth among airlines could depress profits.

Declining issues outnumbered advancers on the NYSE by 1,543 to 1,148, for a 1.34-to-1 ratio on the downside. On the Nasdaq, 1,288 issues fell and 1,049 advanced for a 1.23-to-1 ratio favoring decliners.

The S&P 500 index showed seven new 52-week highs and five new lows while the Nasdaq recorded 81 new highs and 12 new lows.

(Reporting by Tanya Agrawal; Editing by Savio D'Souza)