Updates with late afternoon prices, analyst quote

By Twesha Dikshit, Utkarsh Hathi and Saeed Azhar

May 27 (Reuters) - The S&P 500 and the Nasdaq were muted on Wednesday in choppy trading, as investors took a pause from the AI-led market rally, while remaining cautious on progress in Middle East talks.

Banking stocks were down after a slide of almost 2.9% for JPMorgan Chase JPM.N after CEO Jamie Dimon warned that expenses this year could be $1 billion higher than estimated.

The White House denied reports from Iran's state TV that Tehran would restore Strait of Hormuz shipping within a month in exchange for a U.S. military pullback and lifting of a naval blockade.

Still, indexes traded near record highs. The Dow Jones nudged higher, lifted by a rotation into healthcare and consumer stocks. However, a pullback in chip stocks weighed on the tech-heavy Nasdaq.

At 2:12 p.m. the Dow Jones Industrial Average .DJI rose 154.75 points, or 0.31%, to 50,616.43, the S&P 500 .SPX lost 4.13 points, or 0.05%, to 7,515.11 and the Nasdaq Composite .IXIC lost 13.31 points, or 0.05%, to 26,642.87.

"After such a large run-up in the markets, it's not surprising to me that there is a little bit of a pause," said Sean Clark, chief investment officer of Clark Capital Management Group.

"There's a lot of positives to look at right now. Even though the outperformers are really being driven by tech, AI and AI adjacent themes, I wouldn't discount the fact that the broad market is participating as well."

Among the sub-indexes, consumer discretionary .SPLRCD was leading the gains, up almost 1.65%.

Meanwhile, the S&P 500 energy index .SPNY fell 1.1%, tracking a decline of as much as 5% in oil prices. Tech shares .SPLRCT shed 0.6% after reaching an all-time high on Tuesday.

Chip stocks were down after a strong rally. Intel INTC.O fell more than 3.2% and Marvell Technology MRVL.O fell over 3.8%, while Qualcomm .QCOM shed 8%.

The Philadelphia SE Semiconductor index .SOX lost 1.8% after hitting a record high on Tuesday, with chip giant Nvidia NVDA.O off 1%.

"Technology leadership remains difficult to ignore, with the sector continuing to push to new highs on both an absolute and relative basis compared to the broader market," said Adam Turnquist, chief technical strategist, LPL Financial.

"That said, increasingly stretched momentum conditions and elevated positioning raise questions around the near-term durability of the advance."

Zscaler ZS.O tumbled 31% after the cloud security firm projected fourth-quarter revenue below expectations.

Among other movers, GlobalFoundries GFS.O fell 10.6% after Bloomberg News reported that majority owner Mubadala Investment Company was seeking to raise $1.91 billion from an unregistered block sale of GFS shares.

Bath & Body Works BBWI.N jumped almost 11% after reporting first-quarter sales and profit above expectations, while Abercrombie & Fitch ANF.N advanced 12.8% on posting a strong quarterly profit.

Goldman Sachs raised its 2026 year-end forecast for the S&P 500 to 8,000 from 7,600, citing continued strength in corporate earnings.

Markets will next look toward the personal consumption expenditures index data on Thursday. The Federal Reserve's key inflation measure could provide fresh clues on the monetary policy path forward under new chair Kevin Warsh.

Advancing issues outnumbered decliners by a 1.06-to-1 ratio on the NYSE. There were 374 new highs and 84 new lows on the NYSE.

On the Nasdaq, 2,279 stocks rose and 2,487 fell as declining issues outnumbered advancers by a 1.09-to-1 ratio.

The S&P 500 posted 36 new 52-week highs and 7 new lows while the Nasdaq Composite recorded 152 new highs and 65 new lows.