Wall Street drops as tech stocks take a beating

By Sruthi Shankar

(Reuters) - The tech-heavy Nasdaq saw sharp declines on Thursday as internet stocks faltered for a second day on concerns about increased regulation, while warnings from Micron Technology and KLA-Tencor led a slide in chip stocks.

Micron sank 8.7 percent after Chief Financial Officer David Zinsner said prices of NAND chips declined in the third quarter and at least two brokerages said the markets for NAND and DRAM chips were worsening.

KLA-Tencor tumbled 9.6 percent, and weighed on other chip equipment makers, after Chief Financial Officer Bren Higgins said September was still "a drought for DRAM" and that a pick-up in business later this year would be less than expected.

The Philadelphia SE Semiconductor index slid 2.6 percent, led by Micron and KLA-Tencor.

Facebook and Twitter executives defended their companies before skeptical U.S. lawmakers on Wednesday and the U.S. Department of Justice said it would discuss, at a meeting on Sept. 25, concerns that social media platforms are "intentionally stifling the free exchange of ideas".

Facebook fell 3.8 percent, Twitter dropped 6.1 percent, Alphabet slipped 2.8 percent and Snap was down 4.8 percent, hitting a fresh record low.

The losses, along with those in chip companies sent the S&P 500 Information Technology index down 1.37 percent.

"The market has lost its leader for now, while people take profits based on the potential for regulation," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management in Milwaukee, Wisconsin.

"We've stretched this rubber band pretty far and potentially it's time for other sectors to lead rather than follow."

Investors were keeping an eye on trade developments as a public comment period, on the Trump administration's plan for fresh tariffs on $200 billion in Chinese imports, ends on Thursday. China has warned of retaliation if Washington implements any new tariff measures.

U.S.-Canada talks on the North American Free Trade Agreement continue on Thursday.

At 13:04 ET the Dow Jones Industrial Average was down 60.09 points, or 0.23 percent, at 25,914.90, the S&P 500 was down 20.95 points, or 0.73 percent, at 2,867.65 and the Nasdaq Composite was down 108.49 points, or 1.36 percent, at 7,886.68.

Four of the 11 major S&P sectors were higher, led by a 0.44 percent rise in the real estate sector and a 0.37 percent gain in utilities.

Among the bright spots, CBS Corp's shares rose 3.3 percent after a report that the media company's board was in settlement talks with Chief Executive Officer Les Moonves to negotiate his exit, which raised chances of a sale rather than merger with Viacom.

Declining issues outnumbered advancers for a 1.70-to-1 ratio on the NYSE and a 2.02-to-1 ratio on the Nasdaq.

The S&P index recorded 36 new 52-week highs and 10 new lows, while the Nasdaq recorded 80 new highs and 49 new lows.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)