US STOCKS-Wall St edges higher, boosted by healthcare; Alphabet, Amazon pressure Nasdaq

By Medha Singh and Amy Caren Daniel

* Yields on 10-yr U.S. Treasury fall further

* Alphabet, Amazon slip on regulatory scrutiny

* U.S. manufacturing activity unexpectedly slows last month

* Amgen, Merck among boosts to healthcare sector

* Dow up 0.34%, S&P gains 0.28%, Nasdaq down 0.40%

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* Dow up 0.34%, S&P gains 0.28%, Nasdaq down 0.40% (Adds quote, updates prices)

By Medha Singh and Amy Caren Daniel

June 3 (Reuters) - The S&P 500 and Dow Jones industrials ticked higher on Monday, propped up by healthcare stocks, but steep losses in shares of internet giants Alphabet and Amazon on fears of regulatory risks limited advances and kept the tech-heavy Nasdaq in the red.

Alphabet Inc tumbled 6.4% after sources told Reuters the U.S. Justice Department is preparing an investigation of the Google-parent to determine whether the company broke antitrust laws in operating its online businesses.

Amazon.com dropped 3.2% after a report that the e-commerce giant could face heightened antitrust scrutiny under a new agreement between U.S. regulators.

"People are just worried that these companies could be impacted by government regulations," said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

"The concerns that the government is going to get involved and possibly break these companies up or impose fines on their operations is a major concern here."

Their declines weighed on the communication services and the consumer discretionary sectors.

The latest ISM survey showed U.S. manufacturing growth unexpectedly slowed in May to its weakest pace in more than two-and-a-half years. This adds to weak factory activity surveys from Asia and the eurozone earlier in the day.

The ISM data along with trade uncertainty sent investors fleeing for safety in bonds, which pushed yields on U.S. two-year notes to their biggest two-day fall since 2008, reflecting growing conviction that the Federal Reserve will start cutting interest rates to stave off a recession.

Offering some respite, Mexican officials said the country could reach an agreement with the U.S. to resolve a dispute over migration that prompted President Donald Trump to threaten duties last week, which resulted in Wall Street's main indexes ending May 6% lower.

At 10:56 a.m. ET the Dow Jones Industrial Average was up 83.48 points, or 0.34%, at 24,898.52; the S&P 500 was up 7.66 points, or 0.28%, at 2,759.72; and the Nasdaq Composite was down 29.91 points, or 0.40%, at 7,423.24.

Healthcare stocks, the worst performing sector this year, rose 0.99%, helped by positive drug data from a handful of companies including Amgen Inc and Merck & Co.

Amgen jumped 5.4% after its drug showed a high response rate in a small lung and colon cancer trial, while Merck rose 2.0% after data showed nearly a quarter of patients who received immunotherapy Keytruda as an initial treatment for advanced lung cancer were still alive after five years.

Humana gained 3.6% after saying it would not make a bid to combine with health insurer Centene Corp, which plunged 9.1%.

Boeing Co, the single largest U.S. exporter to China, fell 1.7% and was the biggest drag on the blue chip Dow index.

Advancing issues outnumbered decliners by a 2.69-to-1 ratio on the NYSE and by a 1.57-to-1 ratio on the Nasdaq.

The S&P index recorded seven new 52-week highs and 15 new lows, while the Nasdaq posted 16 new highs and 92 new lows. (Reporting by Medha Singh and Amy Caren Daniel in Bengaluru Editing by Bernard Orr)