US STOCKS-Wall St indexes pare declines on hopes of tariff reprieve; chip stocks slide

By Johann M Cherian and Sukriti Gupta

March 6 (Reuters) - Wall Street's main indexes traded off session lows on Thursday after a cabinet official hinted that the U.S. could take a softer stance on tariffs, while chip stocks declined as investors were disappointed by Marvell's forecast.

Commerce Secretary Howard Lutnick said in an interview that Donald Trump is likely to extend the one-month reprieve on tariffs on imports from Mexico and Canada to all products under a free trade pact, from what was previously granted only to automotive products.

However, worries that the president could alter his stance continued to dominate sentiment at a time when the U.S. trade deficit widened to a record high in January.

Tariff-sensitive automakers General Motors GM.N and Ford F.N were down about 1.1% each. Tesla TSLA.O fell 4% following a report that brokerage Baird named the electric carmaker a 'bearish fresh pick'.

"The uncertainty created by rapidly shifting policy pronouncements can damage investment in particular and hurt the economy," said Bill Sterling, global strategist at GW&K Investment Management.

"And the other thing that investors are concerned about is the size of the tariffs. This is way beyond what was experienced in 2018 and could raise inflation."

At 11:36 a.m. ET, the Dow Jones Industrial Average .DJI fell 123.69 points, or 0.29%, to 42,882.90, the S&P 500 .SPX lost 46.15 points, or 0.79%, to 5,796.48 and the Nasdaq Composite .IXIC lost 201.23 points, or 1.08%, to 18,352.61.

Real estate stocks .SPLRCR led sectoral declines and banks .SPXBK lost 1.6%.

The benchmark S&P 500 .SPX is close to levels seen during Trump's election victory and the Russell 2000 index .RUT has fallen over 7.5% since early November. The domestically focused index fell 0.6% on Thursday.

Marvell MRVL.O fell 17.6% after the chipmaker forecast first-quarter sales in line with analysts' average estimate, which failed to excite investors who had expected stronger AI-driven growth.

Peers Broadcom AVGO.O and Nvidia NVDA.O also fell, pulling the broader chip index <.SOX> down over 3%. The broader S&P 500 technology sector .SPLRCT lost 1.3%.

Concerns about overspending and overcapacity in the U.S. AI industry, in the face of China's cheaper DeepSeek models, paused Wall Street's bull rally in January. The tech-heavy Nasdaq .IXIC is now down about 8.8% from its record high hit in December.

On the data front, the number of Americans filing new applications for unemployment benefits fell more than expected last week. Friday's key payrolls data will be crucial for investors trying to gauge the economy's health.

Traders now see the Federal Reserve lowering borrowing costs by 25 basis points for the first time this year in June, according to data compiled by LSEG.

Philadelphia Fed President Patrick Harker said that trouble may be brewing for a economy that is currently in good shape but showing signs of stress in the consumer sector and risks to the inflation outlook.

Comments from policymakers Raphael Bostic and Governor Christopher Waller are due later in the day.

Kroger KR.N rose 4% after forecasting annual same-store sales largely above estimates.

Declining issues outnumbered advancers by a 1.9-to-1 ratio on the NYSE and by a 1.66-to-1 ratio on the Nasdaq.

The S&P 500 posted one new 52-week high and five new lows, while the Nasdaq Composite recorded 21 new highs and 99 new lows.