MUMBAI, Aug 20 (Reuters) - Shares on Wall Street dropped for a second successive day on Wednesday as weakness in the tech sector persisted while a key meeting of central bankers later this week remained in focus for currency and rates traders.
The S&P 500 (.SPX), declined 0.8% and the tech-heavy Nasdaq Composite (.IXIC), dropped nearly 1.5% in early trade, as the pressure persisted after a steep fall on Tuesday. The Dow Jones Industrial Average (.DJI), was down 0.2%.
Analysts pointed to a confluence of factors behind weakness in tech stocks, including concerns over steep valuations, investors exiting profitable positions and a general mood of risk aversion.
"I think we were priced for perfection in the U.S. and there was quite a lot of complacency in markets, so some summer volatility should have been expected," said Ben Laidler, head of equity strategy at Bradesco BBI.
Wariness over U.S. President Donald Trump's growing influence over the sector has also been in focus for investors. U.S. Commerce Secretary Howard Lutnick is looking into the government taking equity stakes in Intel as well as other chip companies, two sources told Reuters.
The potential moves follow other unusual revenue-sharing deals Washington has recently struck with U.S. companies, including AI chip giant Nvidia (NVDA.O), and Advanced Micro Devices (AMD.O), opens new tab.
While the individual developments may be brushed aside by markets, they fall into the broader bucket of concerns over the institutional framework in the United States, Laidler said.
European shares managed to hold on to their gains from earlier in the day, and the pan-European STOXX 600 index (.STOXX), was up 0.2%. Britain's FTSE 100 (.FTSE), climbed 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 called on Federal Reserve Governor Lisa Cook to resign.
The 10-year U.S. Treasury yield was flat at 3.30%, while the 2-year Treasury yield slipped to 3.74%.
The focus is now on The Kansas City Federal Reserve's August 21-23 Jackson Hole symposium, where Fed Chair Jerome Powell is due to speak on the economic outlook and the central bank's policy framework on Friday.
Powell's remarks on the near-term outlook for 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 21bp of rate cuts for September," analysts at ING said in a note.
The minutes of the Fed's July policy meeting were due later on Wednesday, but were unlikely to spur meaningful market reactions as they pre-date weak U.S. labour market data that spurred a firming of rate cut expectations.
Elsewhere, Sweden's central bank kept its key interest rate on hold as expected, while the Reserve Bank of New Zealand cut policy rates to a three-year low and signalled further easing, sending the kiwi down by more than 1%.
Consumer prices in Britain climbed by 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 the print was not even higher prompted a rally in government bonds. The benchmark 10-year gilt yield was last down 6 basis points at 4.69%.
In commodities, Brent crude futures were last up 1% at $66.5 a barrel as investors awaited the next steps in talks to end Russia's war on Ukraine, with uncertainty over whether oil sanctions might be eased or tightened.
Spot gold rose 0.8% to $3,343.89 an ounce.
Reporting by Jaspreet Kalra, Editing by Sonali Paul, Mark Potter and Alex Richardson
