CORRECTED-US STOCKS-S&P 500 near flat as healthcare in spotlight

(Refiles to add dropped word "not" in paragraph 7.)

* PBMs rise after White House kills rebate rule

* Biotechs, drugmakers drag on healthcare sector

* Fed's Powell resumes testimony before Congress

* Indexes: Dow up 0.7%, S&P 500 up 0.07%, Nasdaq down 0.2%

By Caroline Valetkevitch

NEW YORK, July 11 (Reuters) - The S&P 500 was little changed in afternoon trading on Thursday, with healthcare stocks mixed after the Trump administration withdrew a rule that would kill rebates.

Shares of pharmacy benefit managers gained as the news meant these companies would continue to benefit from after-market discounts from drugmakers. Health insurers and drug distributors also rose.

A 5.3% gain in UnitedHealth Group Inc helped the Dow break above 27,000 points for the first time. Cigna Corp surged 9%.

At the same time, drugmakers such as Merck & Co Inc and Pfizer Inc dropped and the Nasdaq biotech index fell 1.7%. The healthcare index was down 0.3%.

Helping to support stocks were comments from Federal Reserve Chairman Jerome Powell, which boosted expectations for an interest-rate cut.

Powell, in his first day of testimony before Congress on Wednesday, confirmed the U.S. economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war and said the Fed stood ready to "act as appropriate." Powell testified before the Senate Banking Committee on Thursday.

The S&P 500 rose above the 3,000 level for the first time Wednesday following the news and hit a high of 3,002.33 on Thursday, but the index has not been able to hold above that level.

"The market has tried several times this week to get through it and hold; that's been a big wall of psychological resistance," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

The Dow Jones Industrial Average rose 174.03 points, or 0.65%, to 27,034.23, the S&P 500 gained 1.97 points, or 0.07%, to 2,995.04 and the Nasdaq Composite dropped 13.86 points, or 0.17%, to 8,188.67.

Iron Mountain slumped after Bank of America Merrill Lynch downgraded the document storage company's shares to "underperform," citing recent declines in recycled paper pricing.

A Labor Department report showed U.S. underlying consumer prices rose by the most in nearly 1-1/2 years in June, but that was unlikely to change expectations the Fed would cut rates this month.

Declining issues outnumbered advancing ones on the NYSE by a 1.19-to-1 ratio. (Additional reporting by Medha Singh and Manas Mishra in Bengaluru; Editing by Shounak Dasgupta, Maju Samuel and Jonathan Oatis)