* March payrolls data better than expected
* Tesla up after new sedan unveiled
* Indexes down: Dow 0.66 pct, S&P 0.75 pct, Nasdaq 0.76 pct (Updates to open)
By Abhiram Nandakumar
April 1 (Reuters) - Wall Street started the second quarter with losses on Friday after data showed U.S. employment rose more than expected in March, a sign of economic strength that could allow the Federal Reserve to gradually raise interest rates this year.
Stocks were also under pressure from a 4 percent fall in crude prices amid increasing skepticism that a looming deal to freeze crude production can help clear a global glut.
The Labor Department’s report showed non-farm payrolls increased 215,000 in March, more than the 205,000 estimated.
While the unemployment rate rose to 5 percent from an eight-year low of 4.9 percent, it was because more Americans continued to return to the labor force.
“I think the strength of payrolls suggest the Fed will undoubtedly raise rates this year, likely in June,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.
“This report suggests decent U.S. economic strength, and may provide a boost to corporate profits and riskier assets like equities,” Carter added.
While traders are pricing in only one rate hike in 2016, the odds are now about a one-in-three chance of a hike in June, and a better-than-even chance of one by September, based on the price of Fed funds futures contracts.
Fed Chair Janet Yellen this week urged caution on raising interest rates, given the global risks to the U.S. economy and low oil prices.
At 9:36 a.m. ET the Dow Jones industrial average was down 116.42 points, or 0.66 percent, at 17,568.67, the S&P 500 was down 15.46 points, or 0.75 percent, at 2,044.28 and the Nasdaq Composite was down 36.88 points, or 0.76 percent, at 4,832.97.
Nine of the 10 major S&P sectors were lower, led by a 1.75 percent decline in the energy sector. Chevron was off 2 percent and weighed the most on the Dow, while Exxon fell 1.2 percent and was the biggest drag on the S&P.
A separate report at 10 a.m. ET (1400 GMT) on Friday is expected to show the Institute for Supply Management’s national manufacturing index rose to 50.7 in March from 49.5 in February.
U.S. stocks ended the first quarter with a whimper on Thursday after a seven-week rally that rescued the S&P 500 from its worst start to a year since 2009. The recovery helped the S&P and the Dow log their second-straight quarter of gains.
Tesla’s shares were up 7.4 percent at $246.70 after the electric carmaker unveiled a new sedan with increased range.
Marriott was down 6.3 percent at $66.67 after China’s Anbang Insurance abandoned its $14 billion bid for Starwood Hotels. Starwood was down 5.2 percent at $79.13.
Declining issues outnumbered advancing ones on the NYSE by 2,233 to 441. On the Nasdaq, 1,724 issues fell and 514 advanced.
The S&P 500 index showed 17 new 52-week highs and one new low, while the Nasdaq recorded six new highs and six new lows. (Reporting by Abhiram Nandakumar; Editing by Saumyadeb Chakrabarty)