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By Johann M Cherian and Shristi Achar A

Jan 5 (Reuters) - Wall Street's main indexes edged higher on Friday as gains in megacap stocks outweighed pressure from a stronger-than-expected jobs report that tempered expectations of rapid interest rate cuts this year.

A Labor Department report showed U.S. employers hired more workers than expected in December, while raising wages at a solid clip. The unemployment rate held steady from November at 3.7%, compared with expectations of a 3.8% rise, while average earnings advanced 0.4% on a monthly basis, against forecasts of 0.3% growth.

"While the data confirms that the economy is strong and that a soft landing is in play, it's a bit of a reality check for a market that was slightly ahead," said Ross Mayfield, investment strategy analyst at Baird.

"This report certainly pushes expectations out a little bit and May is probably a good base case to use right now (for rate cuts)."

Money markets have scaled back expectations for a rate cut in March, with traders now seeing a 57% chance of at least a 25-basis point cut, from nearly 65% before the data, according to the CME Group's FedWatch tool.

Meanwhile, the Institute of Supply Management's (ISM) report showed U.S. services activity slowed considerably in December, with the purchasing manager's index (PMI) at 50.6, against expectations of 52.6.

Big tech stocks including Amazon.com AMZN.O, Nvidia NVDA.Oand Alphabet GOOGL.O edged higher between 0.4% and 1.2%, cushioning the indexes.

On a weekly basis, the benchmark S&P 500 .SPX was on track for its worst performance since late October as investors cashed in after a nine-week winning streak driven by bets that aggressive rate cuts were on the horizon.

The Nasdaq .IXIC was on course for its worst week since late September, impacted by rotation out of tech-heavy stocks into defensive sectors like healthcare, financials and utilities.

At 10:00 a.m. ET, the Dow Jones Industrial Average .DJI was up 65.67 points, or 0.18%, at 37,506.01, the S&P 500 .SPX was up 17.55 points, or 0.37%, at 4,706.23, and the Nasdaq Composite .IXIC was up 48.55 points, or 0.33%, at 14,558.85.

Financials .SPSY and energy stocks .SPNY led advances among the 11 S&P 500 sectors, up 0.7% and 0.6%, respectively.

In company news, Applied Therapeutics APLT.O tumbled 31.9% after the drug developer's heart disease drug showed disappointing results in a late-stage trial.

Palantir TechnologiesPLTR.N lost 1.6% after Jefferies downgraded the data analytics firm to "underperform" due to high stock valuations.

PelotonPTON.O jumped 11.9% after the fitness equipment maker said it will bring its workout content to short-form video platform TikTok in an exclusive partnership.

Later in the day, investors will parse remarks by Richmond Fed President Thomas Barkin, a voting member this year.

Advancing issues outnumbered decliners by a 1.68-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.08-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and no new low, while the Nasdaq recorded 21 new highs and 42 new lows.

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S&P 500, Nasdaq on track to snap nine-week winning streak https://tmsnrt.rs/3vvGbsI

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru; Editing by Devika Syamnath)

((johann.mcherian@thomsonreuters.com;))

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