Sept 7 (Reuters) – The Dow Jones and S&P 500 fell on Tuesday, as worries over the slowing pace of economic recovery overshadowed hopes that the Federal Reserve would maintain its accommodative stance a little longer after a soft U.S. payrolls report.

Amgen Inc (AMGN.O) and Merck & Co (MRK.N) fell about 2.4% each as the drugmakers dragged down the Dow Jones index (.DJI), after Morgan Stanley cut its rating on the stocks to “equal-weight” from “overweight”.

Nine out of eleven sub-indexes traded lower with economy-sensitive sectors like industrials (.SPLRCI), real estate (.SPLRCR) and materials (.SPLRCM) leading declines.

The tech-heavy Nasdaq (.IXIC), however, hit a record high before losing steam, as a sudden jump in benchmark bond yields , which were at their highest since July, weighed on the sector that generally performs better in a low-interest environment.

Gains in Amazon.com Inc (AMZN.O), Facebook Inc (FB.O), Apple Inc (AAPL.O), Google-owner Alphabet Inc (GOOGL.O) and Netflix (NFLX.O) helped offset the effect of higher yields and kept the Nasdaq near its record highs.

Banks (.SPXBK) rose 0.5%, tracking benchmark bond yields .

“People are still optimistic about the market, but at this moment, with the market at all-time highs, expensive valuations and with the economy showing signs of slowing growth, few investors are taking these factors as a hint to pull some money off the table,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

Tepid August payrolls data on Friday last week raised concerns that the economic recovery was slowing down.

Still, the S&P 500 (.SPX) and Nasdaq are up 1.3% and 1.5%, respectively, since Aug. 27 following dovish commentary from Fed Chair Jerome Powell that a stable job market was an essential goal for the central bank to start pulling back monetary support.

Easy central bank policies and reopening optimism have pushed the benchmark indexes to record highs over the past few weeks, but concerns over rising Delta coronavirus infections and its impact on the economic recovery could impede the rally.

At 11:55 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 274.89 points, or 0.78%, at 35,094.20, the S&P 500 (.SPX) was down 17.94 points, or 0.40%, at 4,517.49, and the Nasdaq Composite (.IXIC) was up 4.98 points, or 0.03%, at 15,368.50.

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Match Group Inc (MTCH.O) shares jumped 6.5% after the S&P Dow Jones Indices said on Friday the Tinder parent will join the benchmark index.

Columbia Property Trust Inc (CXP.N) surged 15.2% after Pacific Investment Management Company said it would buy the company for $2.2 billion. L4N2Q92J1

Declining issues outnumbered advancers for a 2.29-to-1 ratio on the NYSE and for a 1.69-to-1 ratio on the Nasdaq.

The S&P index recorded 12 new 52-week highs and one new low, while the Nasdaq recorded 97 new highs and 16 new lows.

Reporting by Shashank Nayar in Bengaluru; Editing by Anil D’Silva and Arun Koyyur

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