*

KB Home ( KBH ) falls after Q3 profit misses estimates

*

Apple ( AAPL ) edges down as data shows China sales drop in Aug

*

Ford, GM slide on Morgan Stanley downgrade

*

Indexes: Dow down 0.70%, S&P 500 down 0.19%, Nasdaq up

0.04%

(Updates with closing prices)

By Echo Wang

Sept 25 (Reuters) - The Dow Jones Industrial Average and

S&P 500 closed lower on Wednesday, pulling back from recent

record highs driven by China's sweeping stimulus package, as

investors awaited economic indicators and signals on upcoming

interest rate cuts.

The three main indexes were positioned for monthly gains

after the Federal Reserve's rate cut on Sept. 18 bolstered hopes

for a soft landing. However, a weak consumer sentiment report on

Tuesday raised concerns about the health of the labor market.

"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

rose on concerns 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.

The Dow Jones Industrial Average fell 293.47

points, or 0.70%, to 41,914.75. The S&P 500 lost 10.67

points, or 0.19%, at 5,722.26 and the Nasdaq Composite

gained 7.68 points, or 0.04%, at 18,082.21.

The blue-chip Dow slipped after hitting record highs,

pressured by a decline in Amgen ( AMGN ), which reported mixed

data on two drugs, sparking concerns over heightened

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."

Nine out of the 11 S&P 500 sectors fell, led by energy

stocks which fell 1.9%. Tech stocks bucked the

trend with a 0.5% rise, supported by Nvidia's ( NVDA ) 2.14%

gain.

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 focus, however, will be on 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 ) shares slipped 0.52% as 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/PN ), Bank of America ( BAC ) and JPMorgan &

Chase ( JPM ) weighed on the broader bank index, which

dropped 0.93%.

KB Home ( KBH ) slipped 5.35% after posting a downbeat

third-quarter profit.

Hewlett Packard Enterprise ( HPE ) topped the S&P 500 with a

5.14% gain after Barclays' rating upgrade.

Shares of Ford and General Motors ( GM ) fell over

4% after

Morgan Stanley lowered

its recommendations on the automakers.

Declining issues outnumbered advancers by a 2.4-to-1

ratio on the NYSE. There were 387 new highs and 56 new lows on

the NYSE.

The S&P 500 posted 36 new 52-week highs and two new lows

while the Nasdaq Composite recorded 70 new highs and 110 new

lows.

Volume on U.S. exchanges was 10.42 billion shares,

compared with the 11.69 billion average for the full session

over the last 20 trading days.