Adds comment, updates prices

By Medha Singh and Twesha Dikshit

June 5 (Reuters) - The S&P 500 and the Nasdaq were set to fall at market open on Friday, as chipmakers lost steam following a sharp rally, while a stronger-than-expected monthly jobs report raised expectations of a hawkish monetary policy.

Nonfarm payrolls rose by 172,000 jobs in May after increasing 115,000 in April. The numbers were also way higher than the 85,000 forecast by a Reuters survey of economists.

Money markets now see a 98% chance that the U.S. Federal Reserve will hike interest rates by 25 basis points before the end of the year, up from a nearly 60% expectation before the data.

The data comes ahead of new Federal Reserve Chair Kevin Warsh's first policy meeting later this month, as he takes charge of an economy grappling with elevated inflation, partly exacerbated by the Middle East conflict.

"You're not talking about a labor market that's doing fabulous, but you're also not looking at a labor market that's completely crumbling," said Mark Malek, chief investment officer at Siebert Financial.

"It's healthy for the market to pull back a little bit and slow down."

Nvidia NVDA.O, the largest company by market value, fell 1.5%, while Intel INTC.O, Micron MU.O, AMD AMD.O and Broadcom AVGO.O dropped between 1.2% and 4% in premarket trading.

Gains in semiconductor stocks were instrumental in Wall Street's recovery from March lows to record highs. A temporary ceasefire in the Middle East and strong earnings growth also supported the advances.

At 08:45 a.m. ET, Dow E-minis YMcv1 were up 69 points, or 0.13%, and S&P 500 E-minis EScv1 were down 40.75 points, or 0.54%. Nasdaq 100 E-minis NQcv1 were down 360.75 points, or 1.18%.

If losses hold through the session, the S&P 500 .SPX would register its first weekly decline since April. The tech-heavy Nasdaq was also set to end the week slightly lower, while the price-weighted Dow was on track to rise for the third straight week.

On Thursday, Hezbollah rejected a new Lebanon ceasefire, while Israel said it would keep troops in place, dealing a blow to U.S. President Donald Trump's push to end the fighting and advance talks with Tehran.

Citi said it was trimming equity exposure after a strong run. It had taken a bullish call when the Middle East ceasefire took hold in April. It flagged rising inflation and positioning risks, while keeping a constructive longer-term view on U.S. equities supported by AI-driven earnings.

Among the major market movers on Friday, Lululemon Athletica LULU.O slumped nearly 11% after the athletic apparel maker cut its annual profit forecast and projected second-quarter earnings well below Wall Street estimates.

Cooper Companies COO.O rose 8.4% after the maker of contact lenses beat estimates for second-quarter results.

S&P Global said it would not change the eligibility requirements for its major indices, which effectively rules out a swift entry for Elon Musk's SpaceX to the benchmark S&P 500 after it goes public in what would be the world's biggest IPO.

Meanwhile, S&P Dow Jones Indices will announce the results following its rebalancing after markets close. Chipmaker Marvell Technology MRVL.O, which now boasts of more than $270 billion in valuation, is among the contenders to be added to the benchmark index.