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* Micron falls on lowered revenue forecast
* Semiconductor stocks drop for third session, down 27.3% YTD
* Novavax falls 29% after cutting revenue view by half
* Indexes: Dow slips 0.02%, S&P off 0.31%, Nasdaq down 1.09% (Updates prices, details; adds comment)
By Bansari Mayur Kamdar and Aniruddha Ghosh
Aug 9 (Reuters) - The tech-heavy Nasdaq fell on Tuesday after a dismal forecast from Micron Technology dragged chip and technology stocks lower, while markets remained on the edge ahead of inflation data that will feed into the U.S. Federal Reserve's rate-hike plans.
A high inflation print on Wednesday, following last week's strong jobs numbers, will likely push the Fed to continue with aggressive rate hikes and weigh on a recent recovery in stocks.
Traders see a 70% chance of the Fed raising interest rates by 75 basis points in September, its third such big hike.
Adding to concerns around a tight labor market and inflation, data showed U.S. worker productivity fell sharply in the second quarter and on an annual basis posted a record decline.
Five of the 11 major S&P 500 sectors fell, with consumer discretionary, information technology and communication services stocks down between 0.7% and 1.5%.
Micron Technology Inc slid 4.8% as the memory-chip maker cut fourth-quarter revenue forecast and warned of a negative free cash flow in the following quarter as demand for chips used in personal computers and smartphones drop.
Heavyweight peers Nvidia and Advanced Micro Devices tumbled about 4% each, extending sharp losses from the previous session after a revenue warning from Nvidia.
"It does add to a general growing realization that the move the market experienced in July was probably more of a counter-trend rally in a deteriorating economic situation for both companies (Micron and Nvidia)," said Robert Stimpson, chief investment officer at Oak Associates Funds.
The broader Philadelphia Semiconductor Index has declined about 7% in the last three sessions.
Meanwhile, U.S. President Joe Biden signed a landmark bill to provide $52.7 billion in subsidies for U.S. semiconductor production and research and to boost efforts to make the United States more competitive with China's science and technology efforts.
"It's utterly discounted," said Michael Shaoul, chief executive officer at Marketfield, on why chip stocks were unfazed by the bill.
Shaoul said trading volumes remained low due to summer and "it really doesn't take a lot of capital to push over yields or the S&P".
Rate-sensitive growth and technology stocks slipped as U.S. Treasury yields climbed, with megacaps such as Alphabet Inc and Tesla Inc down more than 1% each.
At 11:41 a.m. ET, the Dow Jones Industrial Average was down 7.49 points, or 0.02%, at 32,825.05, the S&P 500 was down 12.96 points, or 0.31%, at 4,127.10, and the Nasdaq Composite was down 138.44 points, or 1.09%, at 12,506.02.
Despite a choppy recovery since mid-June, the benchmark index is down 13.5% this year after hitting a record high in early January as surging prices, hawkish central banks and geopolitical tensions weigh.
Stronger-than-expected earnings from corporate America have been a positive, with 77.5% of S&P 500 companies beating earnings estimates, according to Refinitiv data as of Friday.
U.S. vaccine maker Novavax slumped 28.9% after it halved its annual revenue forecast as it does not expect further sales of its COVID-19 shot this year in the United States amid a global supply glut and soft demand.
Declining issues outnumbered advancers for a 1.80-to-1 ratio on the NYSE and a 2.46-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and 30 new lows, while the Nasdaq recorded 36 new highs and 43 new lows.
(Reporting by Bansari Mayur Kamdar and Aniruddha Ghosh in Bengaluru; Editing by Saumyadeb Chakrabarty, Arun Koyyur and Shounak Dasgupta)