Dow, S&P 500 fall; focus on outlook for higher interest rates

NEW YORK, Oct 2 (Reuters) - The Dow and S&P 500 were lower on Monday with utilities falling sharply, while the Nasdaq was barely changed as investors weighed the likelihood the Federal Reserve will need to hold interest rates higher for longer.

Fed Governor Michelle Bowman said she remains willing to support another increase in the central bank's policy interest rate at a future meeting if upcoming data shows progress on inflation is stalling or proceeding too slowly.

The U.S. central bank said last month it may hike rates again as it struggles to bring inflation closer to its 2% annual target.

"We ended September with a market that was enveloped by uncertainty. Coming into this month, it's a market that needs confirmation that earnings are working their way higher ... and that needs to ascertain where the Fed is headed," said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

Investors continue to keep a close eye on rising Treasury yields, she said, but the advance on Monday was tied to an agreement to avert a partial U.S. government shutdown, which reduced demand for the debt before this week's key jobs data.

Rate-sensitive utilities (.SPLRCU) was the day's worst-performing S&P sector, down 5.3% in afternoon trading, on course for its biggest one-day percentage decline since April 2020.

Energy (.SPNY) also fell sharply, while technology (.SPLRCT) was up 0.7%.

The Dow Jones Industrial Average (.DJI) fell 207.04 points, or 0.62%, to 33,300.46, the S&P 500 (.SPX) lost 23.23 points, or 0.54%, to 4,264.82 and the Nasdaq Composite (.IXIC) added 8.85 points, or 0.07%, at 13,228.17.

Shares of Nvidia (NVDA.O) gained after Goldman Sachs added the chipmaker's stock to its conviction list.

Economic data showed U.S. construction spending increased in August. The monthly U.S. jobs report is due on Friday.

S&P 500 companies report third-quarter results later this month, with analysts expecting earnings to have risen slightly from the year-ago quarter.

Declining issues outnumbered advancers on the NYSE by a 5.00-to-1 ratio; on Nasdaq, a 2.77-to-1 ratio favored decliners.

The S&P 500 posted two new 52-week highs and 51 new lows; the Nasdaq Composite recorded 20 new highs and 283 new lows.

Additional reporting by Shubham Batra and Shashwat Chauhan in Bengaluru Editing by Vinay Dwivedi, Maju Samuel and Richard Chang

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