Japan's Nikkei falls as tech shares track US peers lower

TOKYO, Aug 21 (Reuters) - Japan's Nikkei share average fell on Thursday as investors sold stocks to book profits from a recent rally, with technology stocks tracking U.S. peers lower.

As of 0215 GMT, the Nikkei .N225 dropped 0.5% to 42,689.22. The index is headed for a third straight session of decline, slipping from record highs hit earlier this week.

The broader Topix .TOPX slipped 0.42% to 3,085.78.

"Investors kept selling stocks to book profits, but some investors who were not able to buy shares during the rally picked up stocks on the dip... (which) capped the Nikkei's losses," Shinkin Asset Management's senior fund manager Naoki Fujiwara said.

Chip-making equipment maker Tokyo Electron 8035.T fell 2% and technology investor SoftBank Group 9984.T lost 2.05%.

On Wall Street, the Nasdaq .IXIC and S&P 500 .SPX fell overnight as investors sold tech stocks and moved into less highly valued sectors. .N

Drugmaker Daiichi Sankyo 4568.T lost 5.75% to become the worst performer among the 225 stocks on the Nikkei.

Bucking the trend, shares of chip-testing equipment maker Advantest 6857.T rose 1.95%, rebounding from a 5.6% loss on Wednesday.

Cable makers, considered a gauge for demand for data centres, rose, with Furukawa Electric 5801.T and Fujikura 5803.T gaining 1.54% and 1.28%, respectively.

The market awaited remarks from Federal Reserve Chair Jerome Powell, who is expected to speak on Friday at the Fed's annual conference in Jackson Hole, Wyoming, for policy signals.

Investors have been pricing in a 25-basis-point rate cut in September, according to data compiled by LSEG.

Shinkin Asset's Fujiwara said the market already priced Powell's dovish comments, so remarks that are in line with expectations may trigger a sell-off in local stocks next week.

"For the Nikkei to rise further, the market needs to confirm the Fed's rate cut in September, and the fate of Japanese politics and Japanese corporate outlook for the second half of the year," Fujiwara said.