US STOCKS-Wall St drops after weak data, healthcare slump

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* U.S. construction spending falls, Q4 GDP seen revisedlower

* Stocks give up initial gains from US-China trade optimism

* AT&T shares fall after news of WarnerMedia restructuring

* Indexes down: Dow 0.79 pct, S&P 500 0.39 pct, Nasdaq 0.23pct (Updates to close of U.S. market)

By Lewis Krauskopf

March 4 (Reuters) - Wall Street's major indexes fell onMonday, weighed down by a weak U.S. construction spending reportand declines in healthcare shares, as an initial rally onoptimism over a U.S.-China trade deal faded.

U.S. construction spending unexpectedly fell in December asinvestment in both private and public projects dropped, leadingeconomists to expect that the government will trim its economicgrowth estimate for the fourth quarter.

Before turning negative, stocks had climbed following areport that U.S. President Donald Trump and Chinese President XiJinping could reach a formal trade deal at a summit around March27.

Optimism over the world's two largest economies reaching atrade truce already has been a significant factor fueling themarket's rally since late December, along with investors' beliefthat the Federal Reserve will not be aggressive in raisinginterest rates. The S&P 500 remains up more than 11 percent in2019.

"There has been a pricing in of this expectation throughoutthe early months of 2019, which is partly why you have had sucha bullish market," said Alicia Levine, chief strategist at BNYMellon Investment Management in New York.

"The market expects a trade deal with China, so there is alittle bit of sell on the news here," added Levine, who saidstocks ultimately could still move higher on a trade deal.

The Dow Jones Industrial Average .DJI fell 206.67 points,or 0.79 percent, to 25,819.65, the S&P 500 .SPX lost 10.88points, or 0.39 percent, to 2,792.81 and the Nasdaq Composite .IXIC dropped 17.79 points, or 0.23 percent, to 7,577.57.

Levine and other market watchers also pointed to the 2,800level for the S&P 500 as a key technical level. The benchmarkindex rose as high as 2,816.88 during the session.

"You'd have to point the finger (for the market's drop) atthe China trade negotiations and the fact that we hit technicalresistance again at 2,800 on the S&P 500," said Bucky Hellwig,senior vice president at BB&T Wealth Management in Birmingham,Alabama.

Healthcare .SPXHC , which has underperformed this year, wasthe biggest declining major S&P 500 sector, sinking 1.3 percent.Shares of UnitedHealth GroupUNH.N fell 4.1 percent, weighingon the Dow, while shares of other health insurers also fellsharply.

In healthcare news, Reuters reported that OxyContin makerPurdue Pharma LP is exploring filing for bankruptcy to addresspotentially significant liabilities from lawsuits alleging thecompany contributed to the opioid crisis, sending shares of somepublicly-traded sellers of opioid pain treatments lower.

Still, indexes finished above their session lows. Materials .SPLRCM rose 0.44 percent, the most among the S&P 500 sectors.

In corporate news, AT&TT.N shares fell 2.7 percent as thecompany is restructuring its WarnerMedia business, according toa memo sent to employees on Monday and seen by Reuters.

Declining issues outnumbered advancing ones on the NYSE by a1.38-to-1 ratio; on Nasdaq, a 1.62-to-1 ratio favored decliners.

The S&P 500 posted 40 new 52-week highs and 2 new lows; theNasdaq Composite recorded 83 new highs and 32 new lows.

About 7.9 billion shares changed hands in U.S. exchanges,above the 7.3 billion daily average over the last 20 sessions. (additional reporting by Medha Singh and Amy Caren Daniel inBengaluru; editing by Arun Koyyur, Jonathan Oatis and BillBerkrot) ((lewis.krauskopf@thomsonreuters.com; 646-223-6082; ReutersMessaging: lewis.krauskopf.thomsonreuters.com@reuters.net,Twitter: @LKrauskopf))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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