* FOMC policy meeting starts Tuesday
* Three major Wall Street indexes hit new highs then pare gains
* Indexes up: Dow 0.3 pct, S&P 0.1 pct, Nasdaq 0.03 pct (Updates to late afternoon, adds commentary, changes byline)
By Sinead Carew
Sept 18 (Reuters) - The S&P 500 clung to a small gain on Monday, led by financial stocks ahead of a Federal Reserve meeting, while Nasdaq pared gains sharply as technology stocks reversed course after news of a pricing change at Amazon.com's web services business.
Only four of the 11 major S&P sectors were higher in the late afternoon. After a gain of as much as 0.5 percent earlier in the day, the technology sector was down 0.2 percent.
Rising U.S. Treasury yields boosted financial stocks as higher interest rates tend to lift bank profits. Rate-sensitive sectors such as utilities were the weakest.
From the Fed meeting, which starts Tuesday, investors will want to see details of plans to begin unwinding its $4.2 trillion portfolio of Treasuries and mortgage-backed securities, nearly a decade after the global financial crisis.
This prospect put pressure on utilities and real estate while aiding banks, said Stephen Massocca, Senior Vice President at Wedbush Securities in San Francisco.
"There's momentum in the market. There's lots of cash. Even though the Fed's about to reduce their balance sheet, you continue to have incredibly aggressive monetary policy. That continues to lead to money flowing into the market almost in an indiscriminate fashion," said Massocca.
Investors will also listen closely to Fed Chair Janet Yellen's views on inflation as they look for clues on the timing of the next rate hike.
"The trend in inflation has taken a downtick. I think she (Yellen) will need a little more evidence on the inflation side over the next month or two to have some conviction about moving rates in December," said Ronald Sanchez, chief investment officer at Fiduciary Trust Company International in New York.
At 3:18p.m. ET, the Dow Jones Industrial Average rose 65.99 points, or 0.3 percent, to 22,334.33, the S&P 500 gained 2.59 points, or 0.10 percent, to 2,502.82 and the Nasdaq Composite added 2.10 points, or 0.03 percent, to 6,450.57.
Big technology stocks such as Microsoft and Google's parent Alphabet came under pressure late in the session after Amazon said it would move to charging businesses in one-second increments for use of its servers.
"That competes with Google and Microsoft, and it's going to weigh on the entire tech space," because of price competition, said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
Microsoft shares were down 0.23 percent while Alphabet was off 0.7 percent late and both stocks saw a pickup in volume late in the day.
Advancing issues outnumbered declining ones on the NYSE by a 1.37-to-1 ratio; on Nasdaq, a 1.60-to-1 ratio favored advancers. (Additional reporting by Caroline Valetkevitch in New York, Sruthi Shankar in Bengaluru; Editing by Arun Koyyur and Nick Zieminski)