U.S. stocks declined on Thursday, weighed down by strong labor-market data which is likely to keep the Federal Reserve firmly on its path of rate hikes.

The S&P 500 slightly trimmed losses after St. Louis Fed President James Bullard said the central bank has almost raised rates as high as needed to tame inflation. But investors continued to focus on the robust jobs data that came in earlier in the session, as strength in the labor market remains a concern for the Fed. Government employment figures are due Friday.

The U.S. 10-year Treasury yield hovered around 3.71%, after piercing 3.78% earlier. The dollar gained.

The Fed has indicated that tight labor conditions give it room to keep at its battle against rising prices. At the same time, officials remain worried that financial conditions could get too loose to effectively crimp economic growth, even after the Fed embarked on the most aggressive tightening campaign in decades.

"What the Fed really wants to see is some slack build up in the labor markets, in hopes it can do this gently without creating much of a downturn" Raghuram Rajan, a former governor of India's central bank, said on Bloomberg Television. "But it may well be that by the time it seems that it will have raised rates enough, that the momentum takes us down to a mild recession at the very least."

Atlanta Fed President Raphael Bostic added to the subdued sentiment on Thursday after he said the central bank still has "much work to do" to tame inflation. He added to a chorus of hawkish Fed officials this week. Minneapolis Fed President Neel Kashkari said Wednesday he expects rates to rise as high as 5.4%, while Kansas City Fed's Esther George said she favors a rise above 5%.

Swap rates linked to individual Fed decisions jumped and now suggest a peak in the overnight effective rate of close to 5.05% in the middle of 2023. The current target range for the Fed is 4.25% to 4.5% and there are around 38 basis points of hikes priced in for the next gathering in February.

In company news, Amazon.com Inc. fell, after briefly rising on news that it is laying off more than 18,000 employees, the biggest reduction in its history. Bed Bath & Beyond Inc. sank after warning it might not be able to continue as a going concern. Silvergate Capital Corp. plunged after the bank said the crypto industry's meltdown triggered a run on deposits.

Vildana Hajric reports for Bloomberg News.

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