Updates to US close
Tech-heavy US stock index ends down 0.7%
Concerns over valuation, risk-off mood hurt tech stocks
Trump's growing influence over tech sector raises concerns
By Jaspreet Kalra and Noel Randewich
MUMBAI/SAN FRANCISCO, Aug 20 (Reuters) - Wall Street shares dropped on Wednesday, with a tech selloff extending into a second day, while a key meeting of central bankers later this week remained in focus for currency and rates traders.
The S&P 500 ended down 0.2% and the tech-heavy Nasdaq Composite slid 0.7%, adding to a steep decline on Tuesday. Both indexes partly recovered from deeper, earlier losses.
The Dow Jones Industrial Average edged up 0.04%.
Analysts blamed a confluence of factors for the weakness in tech stocks, including concerns over steep valuations, investors exiting profitable positions, and risk aversion.
"To me, tech was overbought," said Seth Hickle, managing partner at Mindset Wealth Management. "We had really good earnings, and now it's kind of natural for the market just to sell some of that good news."
Wariness over U.S. President Donald Trump's growing influence over tech companies has also been in focus for investors. U.S. Commerce Secretary Howard Lutnick is the government taking equity stakes in Intel and other chip companies, two sources told Reuters.
That follows other unusual revenue-sharing deals Washington recently struck with artificial intelligence chip company Nvidia and Advanced Micro Devices .
Apple , Alphabet and Amazon each dipped more than 1%.
European shares rose, with the pan-European STOXX 600 index up 0.25%. Britain's FTSE 100 rallied 1.17% to a record high, boosted by gains in consumer and healthcare companies.
FOCUS ON JACKSON HOLE
The U.S. dollar weakened slightly against a basket of peers after Trump Federal Reserve Governor Lisa Cook to resign.
The 10-year U.S. Treasury yield was little changed at 3.29%, while the 2-year Treasury yield slipped to 3.74%.
The focus is now on the Federal Reserve's August 21-23 symposium, where Fed Chair Jerome Powell is due to on Friday on the economic outlook and the U.S. central bank's policy framework.
Powell's remarks on the near-term outlook for interest rates will be keenly watched as traders are almost fully pricing in a rate cut next month.
"Even if Federal Reserve Chair Jerome Powell emphasises muted unemployment over sharply revised payrolls, that would be a hard sell to both the White House and a market that is pricing in 21 bp of rate cuts for September," analysts at ING said in a note.
Minutes from the Fed's July meeting, where interest rates were left unchanged, showed almost all policymakers [reuters://realtime/verb=NewsStory/ric=nL1N3UC0KP] viewed it as appropriate to maintain the target range for the federal funds rate at 4.25% to 4.50%, despite two dissenters.
Elsewhere, Sweden's central bank its key interest rate on hold as expected, while the Reserve Bank of New Zealand policy rates to a three-year low and signaled further easing, sending the kiwi down by more than 1%.
Consumer prices in Britain climbed 3.8% in July, data showed, the fastest annual rise for a Group of Seven economy.
The data nudged sterling higher, but it quickly pared gains, while the fact that inflation was not even higher prompted a rally in government bonds. The benchmark 10-year gilt yield was last down 7 basis points at 4.68% .
Oil prices climbed about 1% on a bigger-than-expected weekly drop in U.S. crude inventories as investors awaited the next steps in talks to end the Ukraine war [https://www.reuters.com/world/ukraine-russia-war/], with sanctions on Russian crude remaining in place for now.
Spot gold rose 1% to $3,348.70 an ounce.
World FX rates YTD http://tmsnrt.rs/2egbfVh [http://tmsnrt.rs/2egbfVh]
(Reporting by Jaspreet Kalra, Editing by Sonali Paul, Mark Potter, Alex Richardson, Noel Randewich, Richard Chang, Rod Nickel)
((noel.randewich@thomsonreuters.com [noel.randewich@thomsonreuters.com]))
