Nasdaq, S&P 500 in the red ahead of inflation data, Fed meeting



* CVS rises on 2021 profit forecast raise, 2022 outlook

* Healthcare sole gainer among S&P 500 sectors

* Dow up 0.07%, S&P down 0.48%, Nasdaq down 1.37%

By Devik Jain, Shreyashi Sanyal and Sinéad Carew

Dec 9 (Reuters) - Nasdaq and the S&P 500 were losing ground on Thursday as investors banked some profits after three straight days of gains and turned their focus toward upcoming inflation data and how it might influence the Federal Reserve's meeting next week.

With fears abating about the latest coronavirus variant Omicron, the Nasdaq had rallied 4.7% in the last three sessions while the S&P had advanced 3.6% and the Dow, which was still rising on Thursday, had gained 3.4%.

Nasdaq was leading percentage declines among the major averages, and investors appeared to be in a waiting game ahead of the consumer prices index data due Friday morning. A higher-than-expected reading would strengthen the case for policy tightening ahead of the U.S. central bank's meeting on Dec. 15.

"There seems to be some profit taking after the three days of gains. Also there may be a little risk-off trade ahead of the CPI number on Friday," said Joe Quinlan Chief market strategist for the CIO office of Bank of Amercia, noting investors may be closing out short positions or pausing buying ahead of the data.

"If it comes in hotter than expected it really shines the light and the focus on the Fed meeting. The pressure would build on the Fed for a faster tapering," he said. Fed Chair Powell signaled last week that the meeting would include a discussion about a faster tapering of bond-buying.

"It would reaffirm in many people's minds that the Fed is behind the curve," said Quinlan.

If the inflation number implies a need to hike rates faster, this "would put pressure on technology and give a bid to cyclicals" he said.

"You'd want to buy the companies that could pass on these higher costs to consumers. That undermines the growth story. You want to own more cyclicals and value than growth," said Quinlan.

A Reuters poll of economists predicted the Fed would raise rates by 25 basis points to 0.25-0.50% in the third quarter of next year. However, most saw the risk that a hike comes even sooner.

By 2:59PM ET, the Dow Jones Industrial Average .DJI rose 26 points, or 0.07%, to 35,780.75, the S&P 500 .SPX lost 22.4 points, or 0.48%, to 4,678.81 and the Nasdaq Composite .IXIC dropped 216.11 points, or 1.37%, to 15,570.88.

Eight of the 11 major S&P sectors declined, with consumer discretionary .SPLRCD , real estate .SPLRCR and energy .SPNY jostling for the biggest percentage loser position.

Markets have seesawed since late November when the Omicron variant was discovered, Investors worried it could upend a global recovery at a time of surging inflation with Fed commentary exacerbating volatility.

Wall Street's main indexes were supported this week by an update showing Pfizer PFE.N and BioNTech's BNTX.O vaccine offered some protection against the Omicron variant.

The S&P 500 index .SPX is trading 1.2% below its all-time peak and has recouped nearly all its declines after falling as much as 5.24% since a record high hit on Nov. 22.

Data showed initial claims for state unemployment benefits tumbled 43,000 last week to 184,000, the lowest level in more than 52 years.

CVS Health Corp CVS.N rose 4.9%, boosting the S&P 500 healthcare sector .SPXHC , after the drugstore operator raised its 2021 profit forecast.

Apple's AAPL.O shares were about $7 shy of the $182.85 price needed to reach a $3 trillion market valuation. However the iPhone maker's stock was making little progress on Thursday, last up 0.3% under $176.

GameStop Corp GME.N fell 10% after the video game retailer said it was issued a subpoena by the U.S. securities regulator back in August for documents on an investigation into its share trading activity.

Declining issues outnumbered advancing ones on the NYSE by a 2.62-to-1 ratio; on Nasdaq, a 2.76-to-1 ratio favored decliners.

The S&P 500 posted 22 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 32 new highs and 52 new lows.
Reporting by Sinéad Carew in New York, Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel and David Gregorio

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