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

All of the major S&P 500 sectors fell on the day, led by a 1.7% drop in technology, while defense-related shares like Lockheed Martin gained.

Among the comments by Fed officials, Minneapolis Fed Bank President Neel Kashkari said that at the U.S. 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 U.S. central bank has "time for the clouds to clear" on inflation before starting to cut rates.

On Wednesday, Fed officials including U.S. 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 posted its highest close since Nov. 1.

Stocks were higher early in the day following U.S. 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 fell 530.16 points, or 1.35%, to 38,596.98, the S&P 500 lost 64.28 points, or 1.23%, to 5,147.21 and the Nasdaq Composite dropped 228.38 points, or 1.4%, 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%.

Money markets still currently expect a near 60% 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 shares jumped 12.4% after the apparel maker raised its annual profit forecast, citing savings from its recent cost-cutting measures and fewer discounts.

Volume on U.S. 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.