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* U.S. manufacturing activity slows more than expected in June
* Kohl's tumbles after calling off sale to Franchise Group
* Micron's downbeat forecast fuels selloff in chip sector
* Indexes down: Dow 0.37%, S&P 0.26%, Nasdaq 0.05% (Updates to market open)
By Amruta Khandekar
July 1 (Reuters) - Wall Street started the second half of the year on a dull note on Friday as investors worried over the risks to economic growth from the Federal Reserve's resolve to curb rising prices at all costs.
As the era of cheap money draws to a close and a cycle of higher interest rates sets in, investors for much of the year have been selling equities, pushing the S&P 500 to close out its worst first six months since 1970 on Thursday.
"The first half was really ugly. So expectations would be that we should settle up here," Joe Saluzzi, co-manager of trading at Themis Trading.
"People are hoping we have a better second half but the proof is going to be in the numbers and the first thing they are going to look for is how bad are earnings going to be."
There was more evidence on Friday that rising interest rates was hurting demand in the world's largest economy. Data showed a measure of new orders shrank for the first time in two years and manufacturing activity slowed more than expected in June.
Despite signs of slowing growth, Fed policymakers have been making a case for a second 75-basis points interest rate hike in July, leaving investors assessing the potential hit to corporate earnings.
"Investor confidence is evaporating right now. The Fed is saying they are going to raise interest rates, and if they want the inflation controlled, the economy will go through some pain in the short term and in the next at least six to 12 months," said Kunal Sawhney, chief executive at research firm Kalkine.
"Volatility is going to be there in the second half of the year, given the recession risks have intensified."
Markets saw a turbulent first-half as fears over big interest rate hikes, geopolitical uncertainty, prolonged supply-chain snarls and lockdowns in China weighed on sentiment.
In the previous session, all three indexes posted their second straight quarterly declines. The Dow suffered its biggest first-half percentage plunge since 1962 and the tech-heavy Nasdaq recorded its worst-ever first six months.
"The big techs really got smashed in the second quarter because of those higher yields. We would hope to see some sort of outperformance in the Nasdaq side with those lower yields," added Saluzzi.
Shares of market leaders such as Amazon.com Inc
At 10:12 a.m. ET, the Dow Jones Industrial Average was down 114.85 points, or 0.37%, at 30,660.58, the S&P 500 was down 9.89 points, or 0.26%, at 3,775.49, and the Nasdaq Composite was down 5.81 points, or 0.05%, at 11,022.93.
Micron Technology Inc dropped 5.6% as the memory-chip firm predicted current-quarter revenue below market expectations, triggering concerns the chip sector was turning toward a down cycle.
The broader Philadelphia SE Semiconductor index fell 3.2%.
Facebook-owner Meta Platforms Inc slipped 2.5%. The company has cut plans to hire engineers by at least 30% this year, CEO Mark Zuckerberg told employees, warning them to brace for a deep economic downturn.
Kohl's Corp tumbled 20.9% as the department store chain called off its sale to Vitamin Shoppe-owner Franchise Group, blaming a downturn in market conditions.
Advancing issues outnumbered decliners by a 1.27-to-1 ratio on the NYSE and a 1.42-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week highs and 39 new lows, while the Nasdaq recorded five new highs and 90 new lows. (Reporting by Amruta Khandekar and Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)