US stocks ended the trading week slightly lower as investors weighed economic worries against optimism over interest rate cuts by the Federal Reserve after data showed job growth in the country weakened sharply in August.

Bank shares were among those taking the biggest hit, with the S&P 500 bank index ending 2.4 percent lower.

However, Broadcom shares rose 9.4 percent, helping to offset market losses, a day after the chipmaker unveiled a US$10 billion artificial intelligence chip order from a new customer and
forecast fourth-quarter revenue above estimates.

The US economy created 22,000 jobs last month instead of an estimated 75,000, confirming softening labour market conditions, according to the Labor Department report.

The three major US stock indexes initially rose and broke records following the data, as traders of futures tied to the Fed's policy rate boosted bets that the US central bank will trim rates in quick succession, starting in September, with a 50-basis-point easing now on the table.

The major indexes ended well off their lows of the session.

"It's going to take more than one bad data set for us to dislodge this market at this point," said Pete Mulmat, chief executive of IG North America, parent company of tastytrade, in Chicago.

With so much focus on the rate outlook, US stock investors will pay close attention to inflation data in the coming week. The monthly US consumer price index is due on Thursday.

The Dow Jones Industrial Average fell 220 points, or 0.48 percent, to 45,400, the S&P 500 lost 20 points, or 0.32 percent, to 6,481 and the Nasdaq Composite dropped seven points, or 0.03 percent, to 21,700.

For the week, the Dow fell 0.3 percent, the S&P 500 gained 0.3 percent and the Nasdaq rose 1.1 percent.

"The payroll report today confirms a softening labour market and justifies a rate cut at the Fed meeting later this month," said Bill Merz, head of capital markets research and portfolio construction at US Bank Asset Management in Minneapolis.

"The labour market is going to remain a very important indicator for how this economic picture plays out, but so far consumer spending has really surprised many people despite softening in the labour market."

The US rate futures market has priced in a 7 percent chance that the Fed will cut by 50 bps when it meets on September 16-17, and a 93 percent probability of the more standard 25 bp cut, according to LSEG calculations.

The rate-cut expectations helped the real estate sector end 1 percent higher, and the Philadelphia Housing Index jump 2.1 percent. (Reuters)