(Updates to late afternoon, changes byline)
* Financials off with bond yields day before Q4 big bank reports
* Microsoft, Apple top drag on S&P, Nasdaq
* Merck, Eli Lilly boost health sector
* Indexes down: Dow 0.31 pct, S&P 0.24 pct, Nasdaq 0.37 pct
By Sinead Carew
Jan 12 (Reuters) - The three major U.S. stock indexes declined on Thursday as investors awaited fourth-quarter earnings and details of President-elect Donald Trump's economic policy, bringing a pause to a rally driven by his campaign promises of lower taxes and fiscal stimulus.
While stocks pared losses as the session wore on, all but three of the S&P 500's eleven sectors were still down, with the financial sector leading the decline a day ahead of its first major earnings reports. The S&P had risen 6.4 percent since the election of Donald Trump as president.
Trump on Wednesday gave no details on tax cuts or infrastructure spending in his first news conference since the election. He instead lashed out at U.S. spy agencies and media companies for what he called a "phony" Russia dossier.
On top of policy uncertainty, the market is missing stock buyback support in the quiet period ahead of earnings and individuals are putting more money into bonds than stocks, according to Jeffrey Kleintop, chief global investment strategist at Charles Schwab in Boston.
"Companies can't buy shares, and individuals all of a sudden stopped buying since the election. That could be the reason we're seeing a little bit of a gap down today," said Kleintop, but he noted that the dip could be temporary if earnings are better than expected.
Kleintop cited Investment Company Institute's data on Wednesday showing the biggest cash flows to bond funds from stock funds since the election.
At 3 PM ET, the Dow Jones Industrial Average was down 61.13 points, or 0.31 percent, at 19,893.15, the S&P 500 5.4 points, or 0.24 percent, lower at 2,269.92 and the Nasdaq Composite off 20.68 points, or 0.37 percent, at 5,542.97.
The S&P had fallen as much as 0.9 percent earlier in the session, and its S&P's financial index was down 0.7 percent, as yields on long-dated bonds fell.
The telecommunications and real estate sectors were the best performers with 0.7 and 0.3 percent increases, respectively, as so-called bond substitute sectors reacted to changes in yields.
The S&P's healthcare sector clung to a 0.08 percent increase after tumbling 1 percent in the previous day's session.
The index was helped by a 1.4 percent increase for Merck after multiple broker upgrades and a 2.9 percent increase for Eli Lilly after a U.S. appeals court said it could block Teva Pharmaceutical Industries Ltd from selling a generic equivalent of its top-selling lung cancer drug.
Microsoft fell 1 percent and Apple dropped 0.6 percent, making them the biggest drags on the S&P.
Declining issues outnumbered advancing ones on the NYSE by a 1.54-to-1 ratio; on the Nasdaq, a 1.97-to-1 ratio favored decliners.
The S&P 500 posted nine 52-week highs and four new lows; the Nasdaq Composite recorded 51 new highs and 20 new lows. (Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D'Souza and Steve Orlofsky)