NEW YORK, Jan 6: US stocks closed lower on Friday as the likelihood of an interest rate cut by the Federal Reserve dwindled rapidly in the wake of a government job report which revealed a hefty jump in wages.

Traders said that although overall job growth accelerated in December, the spike in wages last month had lessened the odds of a Fed rate cut anytime soon.

Most analysts expect the Fed to keep rates steady in the near term.

The Dow Jones Industrial Average closed down 82.68 points (0.66 per cent) at 12,398.01 while the Nasdaq composite finished 19.18 points (0.78 per cent) lower at 2,434.25.

The broad-market Standard and Poor's 500 index shed 8.63 points (0.61 per cent) to 1,409.71.

The day's trading was dominated by the inflation worries triggered by the job report, traders said.

US employers added a healthy 167,000 new jobs in December, the Labor Department said in a report that also showed average hourly earnings last month had risen eight cents to $17.04, or a rise of 0.5 per cent from November and 4.22 per cent compared with December 2005.

The job growth was definitely solid but one thing that you did see within that job growth was higher-than-expected hourly earnings. So I think that raises perhaps some inflationary concerns, said Michael Malone, an analyst at Cowen and Co.

The US central bank has already voiced its concern about inflationary pressures, and traders fear that a strong surge in inflation could spur the Fed to consider hiking rates.

Aside from rising hourly wages, other inflation gauges, including wholesale prices, have jumped in recent months.

The Fed's key fed funds rate is currently set at 5.25 per cent, and policymakers will next meet to debate rates on January 31.

On the corporate front, a profit warning from telecom group Motorola also contributed to the downbeat mood on Wall Street.

Motorola said late Thursday that it now expects fourth-quarter earnings per share in a range of 13 to 16 cents per share, which is below the company's internal forecast at the start of the fourth quarter. The telecom group said it had cut its sales forecast for the quarter to between 11.6 billion and $11.8 billion, down from a range of 11.8 billion to 12.1 billion that it had projected in mid-October.

The shortfall in both sales and earnings occurred in the mobile devices segment and is attributed to an unfavorable geographical and product-tier mix of sales as compared to the company's internal forecast, Motorola said.

Motorola's shares closed down a hefty $1.61 (7.8 per cent) at 18.94 dollars.

Other telecoms shares also lost ground: Qualcomm finished down 46 cents at 38.69 dollars, while Nokia shed $1.08 to $19.84.

Automaker stocks were mixed on the eve of the opening of the Detroit auto show.

General Motors ended up 60 cents at 30.24 dollars, while Ford finished down eight cents at $7.62.

Bond prices fell as the yield on the 10-year US Treasury bond rose to 4.646 per cent from 4.618 per cent Thursday, while that on the 30-year bond climbed to 4.743 per cent from 4.724 per cent. Bond yields and prices move in opposite directions.—AFP