US STOCKS-Wall Street falls as jobs data stokes inflation fears

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December US job growth beats expectations

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Walgreens set for best day since 1980 after Q1 profit beat

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Constellation Brands (STZ) slides after trimming FY forecasts

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University of Michigan survey showed consumer sentiment dropped

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Indexes off: Dow 1.13%, S&P 500 0.94%, Nasdaq 0.96%

(Updates to mid-afternoon trading)

By Johann M Cherian, Sukriti Gupta and Carolina Mandl

Jan 10 (Reuters) - U.S. stocks tumbled, with the S&P 500 erasing its 2025 gains, after an upbeat jobs report stoked fresh inflation fears and reinforced bets that the Federal Reserve will be cautious in cutting interest rates this year.

The domestically focused small-cap Russell 2000 index fell 2.14%.

"We started the year on the wrong foot," said Sam Stovall, market strategist at CFRA Research, commenting on the impact of a hotter-than-expected job data on equities. He added the environment for stocks could become "quite challenging."

At 02:00 p.m. the Dow Jones Industrial Average fell 482.30 points, or 1.13%, to 42,154.37, the S&P 500 lost 55.59 points, or 0.94%, to 5,862.66 and the Nasdaq Composite lost 187.52 points, or 0.96%, to 19,291.03.

A Labor Department report showed job growth unexpectedly accelerated in December while the unemployment rate fell to 4.1% as the labor market ended the year on a strong note.

"Now, with at least a stronger appearing economy keeping the Fed on hold for longer, it just makes it a much more difficult environment for stocks, at least short term," said Robert Pavlik, senior portfolio manager, Dakota Wealth.

Traders see the central bank lowering borrowing costs for the first time in June and then staying steady for the rest of the year, according to the CME Group's FedWatch Tool.

Brokerages also revised their Fed rate cut forecasts, with BofA Global Research forecasting a potential rate hike.

However, Chicago Fed president Austan Goolsbee said there is no evidence the economy is overheating again, adding he still expects it will be appropriate to lower interest rates further.

Pressuring stocks, the yield on the 30-year Treasury note touched 5% - its highest since November 2023, while Wall Street's fear gauge hit a more than two-week high.

Ten of the 11 S&P 500 sectors declined, led by financials' 2.34% drop, while rate-sensitive financials and real-estate also lost roughly 2% each.

Adding to the dour mood, a University of Michigan survey showed consumer sentiment dropped to 73.2 in January from the previous month.

Wall Street's main indexes are poised to close their second consecutive week in the red, with the benchmark S&P 500 down around 4% from its record high hit a month ago.

Fresh inflation worries have taken the spotlight, compelling the Fed to issue a cautious forecast on monetary easing last month, as it anticipates policy changes on trade and immigration under President-elect Donald Trump, who is expected to take office in 10 days' time.

Chip stocks such as Nvidia (NVDA) dropped 2.61%, weighed down by a report that the U.S. could announce new export regulations as early as Friday.

Constellation Energy (CEG) soared 26% after agreeing to buy privately held natural gas and geothermal company Calpine Corp for $16.4 billion, while Constellation Brands (STZ) slid 16.1% after cutting its annual sales and profit forecasts.

Walgreens Boots Alliance (WBA) jumped 27.49% after reporting an upbeat quarterly profit.

Declining issues outnumbered advancers by a 3.74-to-1 ratio on the NYSE and by a 3.28-to-1 ratio on the Nasdaq.

The S&P 500 posted 6 new 52-week highs and 32 new lows while the Nasdaq Composite recorded 34 new highs and 193 new lows.

(Reporting by Johann M Cherian and Sukriti Gupta in Bengaluru, and Carolina Mandl, in New York; Editing by Maju Samuel)