Sept 25 (Reuters) - The Dow Jones Industrial Average and S&P 500 edged lower on Wednesday, pulling back from recent record highs spurred by China's sweeping stimulus package, as investors awaited further economic indicators and signals on upcoming interest rate cuts.
The three main indexes were set for monthly gains after the Federal Reserve's rate cut on Sept. 18 boosted hopes of a soft landing. However, a weak consumer sentiment report on Tuesday raised concerns about the labor market health.
"What happened in commodities and basic materials, etc., was quite a reaction to ... 'hey, what if China can get growing again?' And that kind of feeds into other areas, (and) it helps other economies," said Tom Martin, senior portfolio manager at Globalt in Atlanta.
The long-term Treasury bond yield , ticked higher on worries that looser financial conditions could reignite inflation.
Odds of a 50 basis point cut by the U.S. central bank at its November meeting have risen to 57.4%, from a coin toss earlier in the week, the CME Group's FedWatch Tool showed.
As of 2:52 p.m. ET, the Dow Jones Industrial Average (.DJI), fell 265.40 points, or 0.63%, to 41,942.82, the S&P 500 (.SPX), lost 10.09 points, or 0.18%, at 5,722.84 and the Nasdaq Composite (.IXIC), gained 5.05 points, or 0.03%, at 18,079.57.
Seven out of the 11 S&P 500 sectors fell, led by energy stocks (.SPNY). Tech stocks (.SPLRCT), bucked the trend, supported by Nvidia's (NVDA.O), 2.15% gain.
The blue-chip Dow dipped after reaching record highs, weighed down by a 4.97% decline in Amgen (AMGN.O), after the drugmaker reported mixed data on two drugs, sparking concerns over increased competition.
The S&P 500 and the tech-heavy Nasdaq have risen about 20% so far this year, driven by expectations of rate cuts and optimism about artificial intelligence. However, the S&P 500 is trading at valuations significantly above long-term averages.
"Valuations are fairly high right now, sentiment is fairly high," Martin said, noting that caution is creeping in. "It's hard to find bargains out there, because everything that has gotten hit, a lot of it has come back, and the market has broadened out."
Sales of new U.S. single-family homes fell in August, but declining mortgage rates and house prices could stimulate demand in the months ahead.
The main focus, however, will be on the weekly jobless claims and the August U.S. personal consumption expenditure (PCE) index, both set to be released later in the week.
Remarks from Fed Governor Adriana Kugler, expected after markets close, will also be closely examined. But attention will center on Fed Chair Jerome Powell's speech at the New York Treasury Market Conference on Thursday.
Apple (AAPL.O), shares slipped 1.12%. Sales of foreign-branded smartphones, including iPhones, in China fell in August on an annual basis, data from a government-affiliated research firm showed.
Citigroup (C.N), Bank of America (BAC.N), and JPMorgan & Chase (JPM.N), weighed on the broader bank index (.SPXBK), which was down 0.84%.
KB Home (KBH.N), fell 4.82% after posting a downbeat third-quarter profit.
Hewlett Packard Enterprise (HPE.N), topped the S&P 500 with a 4.79% gain after Barclays' rating upgrade.
Ford (F.N), lost 4.09% and General Motors (GM.N), fell 4.99% to bottom the benchmark index after Morgan Stanley lowered its recommendations on the automakers.
Declining issues outnumbered advancers by a 2.37-to-1 ratio on the NYSE. There were 345 new highs and 49 new lows on the NYSE.
The S&P 500 posted 36 new 52-week highs and one new low while the Nasdaq Composite recorded 63 new highs and 89 new lows.
Reporting by Echo Wang in New York; Additional Reportinng by EJohann M Cherian and Purvi Agarwal in Bengalurul; Editing by Maju Samuel and Richard Chang
