* Dollar down; bond yields hit highs after China report
* Lennar falls after reporting Q4 profit miss
* United Continental up on strong traffic, boost Dow Transports
* Indexes down: Dow 0.05 pct, S&P 0.14 pct, Nasdaq 0.31 pct (Updates to early afternoon)
By Sruthi Shankar
Jan 10 (Reuters) - Wall Street's major indexes pared earlier losses on Wednesday as higher U.S. government bond yields drove gains for banks and other financial stocks.
Markets had initially fallen on a Bloomberg report that China, the world's biggest holder of U.S. Treasuries, was considering slowing purchases.
The S&P financial index rose more than 1 percent, helped by gains in Wells Fargo and JPMorgan ahead of results on Friday.
The China report weakened the dollar, which slipped 0.25 percent, while gold jumped to its highest in four months.
At 12:31 p.m. ET (1731 GMT), the Dow Jones Industrial Average was down 13.51 points, or 0.05 percent, at 25,372.29 and the S&P 500 was down 3.93 points, or 0.14 percent, at 2,747.36.
The Nasdaq Composite was down 22.42 points, or 0.31 percent, at 7,141.15.
"We've had a tremendous run, mostly unabated since Trump's election in 2016 and with no volatility. If we do see a pullback, that's going to be a buying opportunity," said Michael Scanlon, managing director of Manulife Asset Management.
The S&P and the Nasdaq have closed at record highs every single day in 2018, buoyed by optimism over global growth and expectations of a strong quarterly earnings.
Earnings for S&P 500 companies are expected to increase by 11.8 percent, with biggest contribution from the energy sector, according to Thomson Reuters I/B/E/S.
"It will be the first time that Corporate America has the ability to talk about guidance that incorporates lower tax rates. It's going to be confusing and noisy but will be fascinating," said Art Hogan, chief market strategist at B. Riley FBR in Boston.
Berkshire Hathaway rose 1 percent after the conglomerate promoted two of its top executives, cementing their status as the most likely successors to Warren Buffett.
Eight of the 11 major S&P sectors were lower, led by a 1.75 percent fall in interest-rate sensitive real estate and 1.24 percent drop in utilities.
Shares of Lennar Corp gained 2 percent as No.2 U.S. homebuilder's orders and total revenue rose more than expected in the fourth quarter.
The Dow Jones Transport index, often looked at as a gauge of the economy's health, rose 0.45 percent after United Continental reported higher traffic for December, boosting other airline stocks.
Department store operator Kohl's rose about 3 percent after two brokerages raised their price targets.
Declining issues outnumbered advancers on the NYSE by 1,786 to 1,077. On the Nasdaq, 1,624 issues fell and 1,264 advanced.
Reporting by Sruthi Shankar in Bengaluru; editing by Patrick Graham and Arun Koyyur