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 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 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 ( TOELF ) fell 2%

and technology investor SoftBank Group lost 2.05%.

On Wall Street, the Nasdaq and S&P 500 fell

overnight as investors sold tech stocks and moved into less

highly valued sectors.

Drugmaker Daiichi Sankyo 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 ( ADTTF ) 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 ( FUWAF ) and Fujikura ( FKURF )

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.