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* Weekly jobless claims fall to 265,000
* Nvidia top drag on Nasdaq, biggest S&P loser
* Bank sector set to fall for second day in a row
* Indexes down: Dow 0.03 pct, S&P 0.03 pct, Nasdaq 0.11 pct (Adds details, comments, updates prices)
By Yashaswini Swamynathan
Dec 29 (Reuters) - U.S. stocks gave up early gains and were little changed in light trading on Thursday as weakness in financials offset gains in healthcare companies.
A report showed the number of Americans applying for jobless claims fell by 10,000 to 265,000 last week, indicating sustained strength in the labor market.
U.S. equities had been enjoying a rally since the presidential election in November on bets that Donald Trump would introduce tax cuts, deregulation and higher infrastructure spending that would spur economic growth.
The near two-month rally has seen the three main Wall Street indexes rack up double-digit percentage gains, but has left some market participants nervous about a potential correction.
The S&P 500 index suffered its biggest one-day percentage drop on Wednesday, following weak housing data and losses in the technology sector. The triple-digit loss on the Dow pulled it further away from its march towards 20,000.
"The market is looking like it has gotten a bit ahead of itself, and while I'm not turning bearish, I am becoming a bit more cautious in the near-term," said Robert Pavlik, chief market strategist at Boston Private Wealth.
"I wouldn't be surprised to see the market begin the year with a little bit of a rally and start to give back quickly."
At 10:56 a.m. ET (1556 GMT), the Dow Jones Industrial Average was down 6.14 points, or 0.03 percent, at 19,827.54.
The S&P 500 was down 0.73 points, or 0.03 percent, at 2,249.19.
The Nasdaq Composite was down 6.12 points, or 0.11 percent, at 5,432.44.
Six of the 11 major S&P 500 sectors were higher, led by gains in the defensive utilities and consumer staples - those that have largely underperformed in the post-election rally.
Financials, which have gained the most from the Trump rally, were off 0.7 percent, building on losses from a day earlier.
Bank of America was among the top five drags on the S&P 500, while Goldman Sachs weighed the most on the Dow.
Chipmaker Nvidia was the top percentage loser on the S&P 500, falling nearly 4 percent, a day after short-seller Citron Research tweeted that the stock could fall to $90 in 2017. The stock was also the biggest drag on the Nasdaq.
The Philadelphia SE Semiconductor index was off 0.7 percent.
Drug developer Cempra lost more than half of its value after the U.S. Food and Drug Administration rejected its antibiotic treatment for pneumonia.
Advancing issues outnumbered decliners on the NYSE by 1,759 to 978. On the Nasdaq, 1,432 issues rose and 1,178 fell.
The S&P 500 index showed one new 52-week highs and two new lows, while the Nasdaq recorded 48 new highs and 23 new lows. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D'Silva)