* Financials, top gainers in recent rally, lead decliners
* Investors bet on Dec.-rate hike
* Dow down 0.25 pct, S&P 500 down 0.23 pct, Nasdaq up 0.27 pct (Updates to late afternoon, adds commentary, changes byline)
By Sinead Carew
New York - Nov 16 (Reuters) - The S&P and the Dow fell on Wednesday as financial stocks ended their seven-day rally, but gains in technology shares kept the Nasdaq in positive territory as investors continued to prepare their portfolios for a Donald Trump presidency.
U.S. stocks have been on a tear since the real estate mogul's surprise victory in the U.S. presidential election. The Dow has closed higher for seven days, with the last four at record levels.
But investors were still looking for clarity on how much of Trump's campaign promises would become a reality, while preparing for higher interest rates and inflation.
His proposals to cut taxes and raise infrastructure spending are seen boosting economic activity and inflation, while a dismantling of foreign trade agreements or an imposition of tariffs on imports would be expected to hurt the U.S. economy.
"You've got a little bit of a hangover from the Trump rally today," said Steven Chiavarone, a New York-based associate portfolio manager at Federated Investors Global Allocation Fund. "The market priced in pretty quickly a very rosy scenario but now you're seeing a little doubt on the counter frame as he puts together his team."
At 2:40 p.m. ET, the Dow Jones industrial average was down 47.83 points, or 0.25 percent, to 18,875.23, the S&P 500 had lost 5.04 points, or 0.23 percent, to 2,175.35 and the Nasdaq Composite had added 14.14 points, or 0.27 percent, to 5,289.76.
While financial stocks gave back gains on Wednesday they were still well above their pre-election levels as investors are betting on higher interest rates and lighter regulation.
Even with a 1.3 percent decline the financial sector is still 9.5 percent higher than before the election. JPMorgan's 2 percent fall weighed the most on that sector.
The S&P technology index, which is down 1 percent since the election, rose 0.7 percent and led the gainers on Wednesday, helped by Apple and Microsoft.
U.S. technology companies, most of which manufacture their products overseas, could bear some of the biggest brunt of any new trade restrictions.
Traders are pricing in an 81 percent chance that the U.S. Federal Reserve will raise rates in December, according to Thomson Reuters data.
Despite the recent pullback, technical analysts say they expect the S&P 500 to hit a record high in the near future.
"Short-term overbought conditions could generate consolidation in the days ahead, but we expect the SPX to ultimately follow the Dow Jones Industrial Average and Russell 2000 Index to new highs," Katie Stockton, chief technical strategist at BTIG, said in a note.
Eight of the 11 major S&P 500 sectors were lower, with the financial index and the utilities sector leading the decliners.
S&P utilities, down 1.2 percent, have fallen 6.2 percent since the election as these dividend focus stocks with fixed rate services become less attractive in a high-inflation and high-interest rate economy.
Declining issues outnumbered advancing ones on the NYSE by a 1.03-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored advancers.
The S&P 500 posted 12 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 160 new highs and 26 new lows. (Reporting by Tanya Agrawal; Editing by Anil D'Silva and Chizu Nomiyama)