US STOCKS-Banks lead Wall St slide after dismal jobs data
* Employment report dims prospect of Fed rate hike
* S&P financials set for biggest 1-day fall in 2 months
* Utilities surge, lead all sectors
* Indexes down: Dow 0.25 pct, S&P 0.38 pct, Nasdaq 0.67 pct (Updates to late afternoon)
By Lewis Krauskopf
NEW YORK, June 3 (Reuters) - Financial stocks led Wall Street lower on Friday after a surprisingly weak jobs report for May prompted concerns about the U.S. economy and whether it can sustain a near-term interest rate hike.
The U.S. economy created the fewest number of jobs in more than 5-1/2-years in May as manufacturing and construction employment fell sharply. Nonfarm payrolls increased by only 38,000 jobs last month against economists' forecast for an increase of 164,000.
Traders significantly lowered their bets that the Federal Reserve will raise rates at its next meetings in June and July, with predictions at 6 percent for an increase at the Fed's June 14-15 meeting, down from about 20 percent on Thursday, according to the CME Group website.
The lowered expectations were reflected in the weakness in the financial sector, which is seen as benefiting in a rising rate environment. The group was off 1.4 percent, on pace for its worst fall in about two months, with declines in shares of large banks like Bank of America and Citigroup. Continuación...