US STOCKS-Nasdaq rally cools as stimulus concerns resurface

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* Cyclical stocks slip, defensives gain
* Tech, consumer discretionary sectors hit records
* Indexes down: Dow 0.61%, S&P 500 0.29%, Nasdaq 0.11%

(Adds comments; Updates prices to early afternoon)
By Shreyashi Sanyal and Devik Jain
Jan 25 (Reuters) - The Nasdaq retreated from a record high
by afternoon trading on Monday as worries over fiscal stimulus
overshadowed optimism about the start of a week of earnings from
mega-cap technology companies.
Investors turned their focus to the U.S. Senate, which is
aiming to pass COVID-19 relief legislation before former
President Donald Trump's impeachment trial begins in early
February. This comes a day after officials in President Joe Biden's
administration tried to head off Republican concerns that his
$1.9 trillion pandemic relief proposal was too
expensive. "The immediate question now is when stimulus aid will be
approved and how much? If the Democrats take a month or so to
push out stimulus then that could very well be seen as a
negative by markets," said Christopher Grisanti, chief equity
strategist at MAI Capital Management in Cleveland.
The Nasdaq struggled for direction, with the so-called
"stay-at-home" winners including Microsoft Corp MSFT.O ,
Facebook Inc FB.O and Apple Inc AAPL.O rising following
upbeat results from Netflix Inc NFLX.O last week.
Microsoft, scheduled to report results on Tuesday, rose 0.3%
as Wedbush raised its price target on the software maker's stock
on expectations of further growth in its cloud business for
2021. "At the end of the day we are still going to be using Amazon
and Apple and all those large cap tech names. So it's not
surprising that those numbers are probably going to come out and
do pretty well," said Jack Janasiewicz, portfolio manager at
Natixis Investment Managers in greater Boston area.
The S&P 500 sectors housing large-cap growth stocks hit
record highs earlier in the session, including technology
.SPLRCT , consumer discretionary .SPLRCD and communication
services .SPLRCL .
Wall Street's main indexes hit all-time highs last week on
hopes of a full economic reopening and efficient distribution of
vaccines across the country, which is suffering from more than
175,000 new COVID-19 cases a day with millions out of work.
Earlier in the day, drugmaker Merck & Co MRK.N said it
would stop development of its two COVID-19 vaccines. The
drugmaker's shares fell 0.5%. Recent gainers including sectors such as financials .SPSY ,
energy .SPNY , industrials .SPLRCI and materials .SPLRCM
led declines on Monday, while defensive utilities .SPLRCU ,
consumer staples .SPLRCS and real estate .SPLRCR were among
the few gainers.
At 12:21 p.m. ET, the Dow Jones Industrial Average .DJI
was down 190.07 points, or 0.61%, at 30,806.91, the S&P 500
.SPX was down 11.33 points, or 0.29%, at 3,830.14, and the
Nasdaq Composite .IXIC was down 14.49 points, or 0.11%, at
13,528.57.
Declining issues outnumbered advancers for a 1.68-to-1 ratio
on the NYSE and a 1.62-to-1 ratio on the Nasdaq.
The S&P index recorded 26 new 52-week highs and no new low,
while the Nasdaq recorded 285 new highs and four new lows.