US STOCKS-Wall Street gains muted after strong jobs data nibbles at Fed rate cut bets

By Sinéad Carew and Twesha Dikshit

Feb 11 (Reuters) - The S&P 500 and the Nasdaq Composite were up slightly in Wednesday's choppy session as investors bet that a stronger-than-expected employment report could delay the Federal Reserve's next interest-rate cuts.

The three main indexes started the session on a strong note, with the S&P 500 and the Nasdaq hitting their highest level in more than a week after the closely watched payrolls report showed much faster than expected U.S. job growth in January while the unemployment rate fell to 4.3%.

However, gains subsided as traders dialed back on bets for rate cuts. While traders are still banking on at least one 25-basis-point cut in June, the probability that rates would hold steady that month crept up to 38.7% from 24.8%, according to the latest data from CME Group's FedWatch tool.

Julia Hermann, global market strategist at New York Life Investments, said that investors digested changes to rate cut bets "quite well" because they interpreted the strong jobs report as good news for the economy.

"This is constructive news in that the economy is not in dire need of rate cuts because the jobs market has been showing some new signs of life," she said. "It comes down to the sweet spot of hiring being strong enough to show us the economy is resilient but not so strong as to derail expectations for future Fed easing."

Investors will next turn their attention to the January Consumer Price Index (CPI) inflation report, which is due out on Friday.

At 2:19 p.m. the Dow Jones Industrial Average .DJI fell 31.37 points, or 0.06%, to 50,156.77, the S&P 500 .SPX gained 11.37 points, or 0.16%, to 6,953.18 and the Nasdaq Composite .IXIC gained 17.53 points, or 0.08%, to 23,120.01.

Under the hood, the stocks were a mixed bag with financial services .SPSY and communications services .SPLRCL sectors both down more than 1% while energy .SPNY led gains with a 2.3% rally followed by consumer staples .SPLRCS up more than 1%.

Technology was a mixed bag with chip stocks rallying sharply and software stocks tumbling again after three sessions of recouping losses from last week's steep selloff fueled by fears of AI-fueled disruption. The Philadelphia semiconductor index .SOX was up more than 2% while the S&P 500 software index .SPLRCIS shed more than 2%.

Software giant Microsoft MSFT.O, down close to 2%, was the biggest drag on the S&P 500 followed by Alphabet GOOGL.O, which was off 2.4% and weighed heavily on the communications services index.

Brokerage firms that already fell on Tuesday after startup Altruist announced AI-enabled tax-planning features, extended their declines on Wednesday with Charles Schwab SCHW.N, LPL Financial LPLA.O and Ameriprise Financial AMP.N falling more than 3% each. Rate-sensitive banks were lower, with the S&P 500 bank index .SPXBK down 2.4%.

Generac GNRC.N rallied more than 19% after its fourth-quarter results. Robinhood HOOD.O shares dropped nearly 10% after the retail brokerage missed fourth-quarter revenue expectations. Wireless network operator T-Mobile TMUS.O gained 1.4% following its fourth-quarter results.

Humana HUM.N slid 2.4% after the health insurer forecast 2026 profit below Wall Street estimates. Moderna MRNA.O shares fell 3.9% after the U.S. Food and Drug Administration decided not to review the company's application for approval of its influenza vaccine.

Advancing issues outnumbered decliners by a 1.04-to-1 ratio on the NYSE where there were 767 new highs and 122 new lows.

But on the Nasdaq, 1,753 stocks rose and 2,951 fell as declining issues outnumbered advancers by a 1.68-to-1 ratio while the S&P 500 posted 95 new 52-week highs and 24 new lows.