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GLOBAL MARKETS-Stocks tumble on tech weakness, dollar gains

(Updates with close of European markets)

* Stocks fall on tech sell-off

* Dollar adds to gains, euro retreats to $1.18

* U.S. initial jobless claims rise less than expected

NEW YORK, Sept 3 (Reuters) - A gauge of global stocks tumbled on Thursday from a record high in its biggest one-day decline in nearly three months as the technology sector sold off, while the dollar continued its bounce from more than two-year lows.

The S&P technology sector, up more than 30% on the year as the best-performing of the 11 major sectors, plunged 5.40% as investors looked for cheaper stocks in other areas. The group contains some of the world’s largest publicly traded companies.

Investors have been concerned about the narrowing leadership of the market rally that pushed the S&P 500 up 60% from its March 23 low through Wednesday, with Wall Street gains largely driven by names such as Apple Inc and Microsoft Corp .

“We have a narrow market rally. Narrow markets beget fragility. When the narrow-rallying names sell off the indexes are going to sell off,” said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.

Signs the U.S. economy’s rebound from coronavirus-driven lockdowns could be stalling in the absence of another round of fiscal stimulus also weighed.

While weekly initial jobless claims fell more than anticipated, they remained extremely high. In addition, the methodology used in the weekly report to address seasonal fluctuations has changed, which analysts said led to fewer claims than over the past two months.

Investors will closely watch Friday’s August employment report for further signs of labor market stagnation.

Other data showed slower growth in the services sector last month, as the boost from fiscal stimulus and business reopenings faded, although it remained above the level signifying growth.

The Dow Jones Industrial Average fell 795.56 points, or 2.73%, to 28,304.94, the S&P 500 lost 123.59 points, or 3.45%, to 3,457.25 and the Nasdaq Composite dropped 567.14 points, or 4.7%, to 11,489.30.

Chicago Federal Reserve President Charles Evans said on Thursday that Congress needs to deliver more fiscal aid and indicated U.S. monetary policy would be eased further and interest rates kept at ultra-low levels for years to help the economy recover its pre-pandemic strength.

European shares closed 1.4% lower after rising more than 1.2% as weakness in tech names spread, with the group falling 3.76%% in its biggest one-day decline since April 21.

The pan-European STOXX 600 index lost 1.40% and MSCI’s gauge of stocks across the globe shed 2.47%. MSCI’s index was on pace for its biggest one-day percentage drop since June 11 after closing at a record high of 594.06 on Wednesday.

The dollar continued to bounce, but gave up some gains after the weekly claims data, while the euro continued its recent slide to dip as low as $1.1789 after climbing as high as $1.20 earlier in the week after the European Central bank expressed concerns about its rapid rise.

The dollar index rose 0.135%, with the euro down 0.1% to $1.1841.

Benchmark 10-year U.S. Treasury notes last rose 9/32 in price to yield 0.6234%, from 0.651% late on Wednesday.

Oil prices weakened, with both Brent and WTI crude hitting one-month lows on worries about weaker U.S. gasoline demand and a slowdown in the economic recovery.

U.S. crude recently fell 0.29% to $41.39 per barrel and Brent was at $44.11, down 0.72% on the day.

Additional reporting by Sinéad Carew; Editing by Dan Grebler and Richard Chang

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