* All three major indexes on track to end week higher
* Twitter jumps on report company moving closer to sale
* Indexes down: Dow 0.38 pct, S&P 0.31 pct, Nasdaq 0.29 pct (Updates to early afternoon)
By Tanya Agrawal
Sept 23 (Reuters) - Wall Street was lower in early afternoon trading on Friday as investors assess valuations after a three-day rally spurred by optimism that the Federal Reserve will hold off from raising interest rates in the near term.
Some analysts have been questioning valuations as corporate earnings continued to be tepid. The S&P 500 is trading 17.4 times expected earnings, above its 10-year average of 14.7, according to Starmine.
"The market is taking a bit of a breather after a strong week," said Mike Bailey, director of research at FBB Capital Partner, in Bethesda, Maryland.
"Investors are saying markets are already expensive and they've become more expensive this week, so this is a bit of a reversal."
Bailey added that if earnings for S&P companies in 2017 were flat or lower, that would be a major cause for concern.
The S&P 500 index notched its best two-day performance in more than two months on Thursday and is up about 1.5 percent this week.
Fed Chair Janet Yellen said on Wednesday that U.S. growth was looking stronger and rate increases would be needed to keep the economy from overheating and fueling high inflation. But the central bank maintained the low-interest rate environment that has helped underpin the bull market for stocks.
The U.S. central bank had hinted that it might raise rates before the year ends and interest rate futures were pricing in roughly a 60 percent chance of a rate increase by December.
At 12:40 p.m. ET (GMT) the Dow Jones industrial average was down 70.1 points, or 0.38 percent, at 18,322.36, the S&P 500 was down 6.78 points, or 0.31 percent, at 2,170.4 and the Nasdaq Composite was down 15.59 points, or 0.29 percent, at 5,323.93.
Eight of the 11 major S&P sectors were lower, with the energy index's 1.23 percent fall leading the decliners.
Oil prices fell about 3 percent, paring weekly gains, on a report that Saudi Arabia did not expect an agreement at next week's talks among major crude exporters aimed at freezing production.
Twitter shares jumped as much as 23 percent to $22.89, posting its biggest one-day percentage gain since its market debut in 2013, after sources said the microblogger has initiated talks to explore a sale.
CNBC earlier reported suitors for Twitter could include Alphabet's Google and Salesforce.com. Salesforce was down 5.1 percent at $70.77 and Alphabet was little changed at $815.86.
Facebook was down 1.3 percent at $128.41 after the WSJ reported the social media giant overestimated viewing time for video ads by 60-80 percent for two years.
Bats Global Markets jumped 21 percent to $32.10, a day after Bloomberg reported CBOE Holdings is in talks to buy the stock exchange. CBOE was up 1.5 percent at $70.47.
Declining issues outnumbered advancing ones on the NYSE by 1,916 to 973. On the Nasdaq, 1,613 issues fell and 1,096 advanced.
The S&P 500 index showed seven new 52-week highs and no new lows, while the Nasdaq recorded 62 new highs and 10 new lows. (Reporting by Tanya Agrawal; Editing by Don Sebastian)