Wall Street lower as tech selloff outweighs bank gains

By Ankur Banerjee and Tanya Agrawal

(Reuters) - Wall Street dipped in late morning trading on Thursday as a selloff in technology stocks outweighed gains in the financial sector.

Tech stocks, which have led the S&P 500's record run this year, pulled back recently after some investors questioned the sector's high valuations and shifted to defensive sectors.

The S&P tech index led the laggards among the 11 sectors, with the index on track to post its biggest monthly loss in a year.

Apple, which fell 1.2 percent, was the biggest drag on all the three major indexes, while Alphabet and Microsoft were among the top three drags on the Nasdaq and the S&P.

However, the financial sector, which rose 1.29 percent, limited the slide.

Shares of the top six U.S. banks rose after the Federal Reserve cleared them in the second part of its annual stress test, allowing them to raise dividend payouts and share buybacks.

"Part of the reason why tech is down today is the steam in the recent rotation out of some of big tech winners and into banks," said Michael Scanlon, portfolio manager at Manulife Asset Management in Boston.

"The catalyst for that rotation today is the really strong stress test results coupled with higher treasury rates this morning and a positive GDP revision, leading investors to move into financial which has underperformed this year."

The financial index has grown 6.6 percent this year, underperforming the 9 percent rise in the S&P.

At 10:54 a.m. ET (1454 GMT), the Dow Jones Industrial Average was down 32.17 points, or 0.15 percent, at 21,422.44, the S&P 500 was down 7.3 points, or 0.29 percent, at 2,433.39.

The Nasdaq Composite was down 54.77 points, or 0.88 percent, at 6,179.65.

Earlier in the day, data showed the U.S. economy slowed less sharply in the first quarter than initially estimated due to unexpectedly higher consumer spending and a bigger jump in exports.

Benchmark 10-year U.S. Treasury yields rose to five-week highs in sympathy with weaker European government debt, as investors evaluated the likelihood that central banks in Europe will soon become less accommodative.

Oil prices rose to a two-week high, extending the rally into the sixth straight session, after a decline in weekly U.S. production eased concerns about deepening oversupply. [O/R]

The energy sector was among the two gainers on the S&P, rising 0.89 percent.

Among stocks, Rite Aid slumped 24.5 percent after Walgreens Boots Alliance terminated its agreement to buy the drug store chain and said it would instead buy nearly half of its stores for $5.18 billion.

(Reporting by Ankur Banerjee and Tanya Agrawal in Bengaluru; Editing by Arun Koyyur)