(Jan 5): Wall Street's main indexes fell sharply on Thursday as fresh evidence of a tight labour market and hawkish comments from policymakers deepened fears of elevated interest rates for longer than expected.

The ADP National Employment report showed a higher-than-expected rise in private employment in December, while another report showed weekly jobless claims fell last week.

The reports came a day after data showed a moderate fall in US job openings, in growing evidence that the labour market remains tight.

Most big technology and growth stocks such as Alphabet Inc and Microsoft Corp fell between 1% and 2.3% as US Treasury yields surged on prolonged rate-hike expectations.

On the benchmark S&P 500 index, rate-sensitive real estate stocks led the losses with a 2.9% drop, with utilities in tow and down 2.1%.

A strong labour market has been a concern for markets pummeled by fears of a recession from rising rates as it gives the Federal Reserve a reason to keep tightening financial conditions for longer than expected this year.

"Everything else within the economy appears to be moderating except labour market demand, which is the key to the Fed stopping rate hikes," said Brent Schutte, chief investment officer of Northwestern Mutual Wealth Management Co.

In the previous session, Wall Street's main indexes erased some of their gains after minutes from the Fed's December meeting showed the central bank was laser-focused on fighting inflation even as officials agreed to slow the pace of rate hikes to limit risks to economic growth.

Both Kansas City Fed leader Esther George and Atlanta President Raphael Bostic on Thursday stressed the central bank's priority to curb stubborn price pressures through policy tightening.

Traders were almost evenly split on chances of a 25-basis point and a 50-bps rate hike in February and now see rates peaking at slightly above 5% in June.

The more comprehensive nonfarm payrolls report is due on Friday, which would provide further clues on labour demand and the rate hike trajectory.

At 12.05pm ET, the Dow Jones Industrial Average was down 382.59 points, or 1.15%, at 32,887.18, the S&P 500 was down 41.92 points, or 1.09%, at 3,811.05, and the Nasdaq Composite was down 116.55 points, or 1.11%, at 10,342.22.

Among individual stocks, Tesla Inc dropped 3.3% after December sales of its China-made electric vehicles fell to a five-month low, while Amazon.com Inc, which announced increased layoff plans, reversed premarket gains.

Walgreens Boots Alliance Inc dropped 7.5% after the drugstore chain posted a quarterly loss on an opioid litigation charge.

Bed Bath & Beyond Inc lost 24.9% after the company said it was exploring options, including a bankruptcy filing.

Declining issues outnumbered advancers for a 2.48-to-1 ratio on the NYSE and a 1.84-to-1 ratio on the Nasdaq.

The S&P index recorded seven new 52-week highs and six new lows, while the Nasdaq recorded 35 new highs and 54 new lows.