US STOCKS-S&P 500, Nasdaq dragged by tech as upbeat data fans inflation fears

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* Weekly U.S. jobless claims hit new pandemic low

* Services industry activity index at record high in May

* GM gains on ‘significantly better’ first-half results (Updates with close of U.S. trading)

By Lewis Krauskopf, Shashank Nayar and Medha Singh

June 3 (Reuters) - U.S. stocks wavered on Thursday, with tech shares dragging on the S&P 500 and Nasdaq, as investors balanced concerns about inflation and the Federal Reserve reining in stimulus with relief about corporate tax hikes.

The Dow was little changed as stocks rebounded somewhat after reports that President Joe Biden offered to scrap his proposed tax hike. In talks with Republicans, the Democrat offered to drop plans to hike corporate rates as high as 28%, and instead set a 15% minimum tax rate for companies, sources told Reuters.

A better-than-expected U.S. weekly unemployment report and private payrolls numbers for May pointed to strengthening labor conditions, ahead of the closely watched U.S. payrolls report due on Friday. A measure of service sector activity increased to a record high.

Investors are focused on whether robust economic reports could prompt the Fed to pare back monetary support put in place during the coronavirus pandemic sooner than expected.

“The market is digesting strong economic data with some inflationary pressures and factoring in whether this will change the timing of Fed tapering and how to factor that into stock prices,” said Brad Neuman, director of market strategy at Alger in New York.

Sparking fears over easing support was the Fed’s announcement on Wednesday that it will begin to unwind its corporate bond holdings acquired last year through an emergency lending facility launched to calm credit markets at the height of the pandemic.

Unofficially, the Dow Jones Industrial Average fell 23.4 points, or 0.07%, to 34,576.98, the S&P 500 lost 15.3 points, or 0.36%, to 4,192.82 and the Nasdaq Composite dropped 141.82 points, or 1.03%, to 13,614.51.

The S&P 500 tech sector fell. Tech and other growth stocks are seen as particularly vulnerable if inflation drives up bond yields and more heavily discounts the value of future cash flows.

“Higher rates and inflation are kind of the package deal that investors are watching right now,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “If you have rising inflation, rising interest rates, they are going to be especially harmful to growth stocks.”

Overall, the S&P 500 is up roughly 12% for the year and within about 1% of its record high.

In company news, General Motors Co shares rose, after the carmaker estimated “significantly better” first-half profits than previously forecast. Rival Ford also gained. (Reporting by Shashank Nayar and Medha Singh in Bengaluru; Editing by Maju Samuel and Richard Chang)