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US STOCKS-Nasdaq tumbles as investors balance mixed data against virus worries

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·3-min read
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(For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window.)

* Non-farm payrolls rise misses estimates but unemployment falls

* DocuSign plunges after disappointing forecast

* Vix hits highest level since January

* Indexes down: Dow 0.17%, S&P 0.91%, Nasdaq 2.07% (Updates prices, adds commentary, byline)

By Devik Jain and Sinéad Carew

Dec 3 (Reuters) - Wall Street's major indexes fell in choppy trading on Friday, with the Nasdaq falling more than 2%, as investors digested mixed economic data and grappled with uncertainty around the potential impact of the Omicron coronavirus variant.

After opening higher, Wall Street could not hold its gains for long. The Labor Department's report, ahead of the session's open, showed that while nonfarm job growth rose less than expected in November the unemployment rate dropped to 4.2%, the lowest since February 2020, and wages increased.

Separately, a measure of U.S. services industry activity hit a record high in November. Both sets of data appeared to influence investor expectations for the U.S. Federal Reserve's next move towards tightening its policy. Fed Chair Jerome Powell said this week that the central bank will consider a faster wind-down of its bond-buying program, a move seen by some as opening the door to earlier interest rate hikes.

"The market may think the jobs report was strong enough to keep the Fed on its path for accelerating bond purchase tapering, said Shawn Snyder, head of Investment Strategy at Citi US Consumer Wealth Management.

Investors were viewing the data alongside reports about Omicron's spread to dozens of countries without any clarity on the severity of the disease or the level of protection provided by existing COVID-19 vaccines.

"There's still the lingering uncertainty what Omicron will mean and if it weights on growth in the future. But it's a really strong (economic report) and most signs are pointing to an accelerating economy in the fourth quarter," said Snyder, adding that this could potentially be weighing on technology shares, which is less dependent on the economy for growth.

By 2:29 p.m. ET (1929 GMT), the Dow Jones Industrial Average fell 239.39 points, or 0.69%, to 34,400.4, the S&P 500 lost 63.36 points, or 1.38%, to 4,513.74 and the Nasdaq Composite dropped 376.85 points, or 2.45%, to 15,004.47.

However, while the technology index, down 2.6%, was leading losses among the S&P 500's 11 major sectors, the S&P's two sole sector gainers were also defensive with consumer staples up 1% and utilities up 0.6%.

The economically sensitive Dow boasted the lowest percentage decline of Wall Street's three major averages on the day and other cyclical sectors like industrials, materials also outperformed.

The S&P, the Dow and the Nasdaq were all set to register declines for the week in which they swung wildly from day to day as investors reacted to the Omicron variant and to Powell's commentary about the Fed's next moves.

"Even if Omicron is not too virulent, all of this, coupled with a hawkish Fed, speaks to increased caution for risk assets, although if corporate profits continue upward, overall equities should still rise except perhaps many of the most expensive ones," said John Vail, chief global strategist at Nikko Asset Management.

Wall Street's fear gauge, the CBOE Market Volatility index , hit a session high in afternoon trading, going above 35 for the first time since late January.

DocuSign Inc plunged 41% after the electronic signature solutions firm forecast downbeat fourth-quarter revenue.

Declining issues outnumbered advancing ones on the NYSE by a 3.35-to-1 ratio; on Nasdaq, a 3.86-to-1 ratio favored decliners.

The S&P 500 posted nine new 52-week highs and six new lows; the Nasdaq Composite recorded 14 new highs and 630 new lows. (Reporting by Sinéad Carew in New York; Devik Jain, Anisha Sircar and Sruthi Shankar in Bengaluru; Editing by Marguerita Choy and Maju Samuel)

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