* Oct nonfarm payrolls up more than expected
* Financial stocks rise, utilities slump
* Alibaba drops as Chanos says stock a possible short
* Indexes down: Dow 0.12 pct, S&P 0.42 pct, Nasdaq 0.03 pct (Updates to late afternoon)
By Lewis Krauskopf
Nov 6 (Reuters) - U.S. stocks slipped on Friday, with a slide in utilities and other sectors outweighing a rise in financials, as a strong jobs report gave Wall Street a clear sign the Federal Reserve could soon raise interest rates.
U.S. non-farm payrolls growth in October was the best since December 2014, while the unemployment rate fell to 5 percent, the lowest since April 2008. Since the Fed last week opened the door to a rate increase in December, investors have been looking to economic data for clues to whether the central bank will take action.
The S&P financial sector rose 1 percent, leading all sectors. Banks tend to benefit from higher borrowing rates, and shares of JPMorgan, Bank of America and Citigroup were each up about 3 percent or more.
The rate-sensitive utilities sector dropped 3.6 percent, the worst performing group, while the energy and consumer staples sectors were each off more than 1 percent.
"The market is reacting today as if rates will be increased in December," said Ben Halliburton, chief investment officer at Tradition Capital Management in Summit, New Jersey.
"They're rotating money to take advantage of that or cut back where they're not going to be advantageous," Halliburton added.
At 2:41 p.m., the Dow Jones industrial average fell 20.87 points, or 0.12 percent, to 17,842.56, the S&P 500 lost 8.83 points, or 0.42 percent, to 2,091.1 and the Nasdaq Composite dropped 1.64 points, or 0.03 percent, to 5,126.10.
Still, all three indexes were poised to end higher for the sixth week in a row.
Energy stocks fell 1.3 percent as crude oil prices slipped. Exxon was down 1.2 percent to $83.79, the biggest drag on the S&P, while Chevron dropped 1.7 percent to $92.96.
Alibaba fell 3.3 percent to $82.56 after a CNBC report said short-seller Jim Chanos pitched the company as a possible short.
Shares of Disney rose 2.6 percent to $115.99 after it reported a higher-than-expected profit.
Declining issues outnumbered advancing ones on the NYSE by 2,092 to 995, for a 2.10-to-1 ratio on the downside; on the Nasdaq, 1,546 issues rose and 1,232 fell for a 1.25-to-1 ratio favoring advancers.
The S&P 500 posted 14 new 52-week highs and 9 new lows; the Nasdaq recorded 138 new highs and 62 new lows. (Additional reporting by Abhiram Nandakumar in Bengaluru, additional reporting by Charles Mikolajczak; Editing by Savio D'Souza and Chizu Nomiyama)