*

Indexes down: Dow 0.43%, S&P 500 0.49%, Nasdaq 0.38%

*

Financial stocks lead

*

Salesforce ( CRM ) rises after strong revenue forecast

(Updates to afternoon trading)

By Sukriti Gupta and Twesha Dikshit

Oct 16 (Reuters) -

Wall Street's main indexes dropped on Thursday, led by

declines in financial stocks, while earlier gains in

semiconductor shares on renewed optimism about artificial

intelligence faded.

The S&P 500 financials index declined 2%. The

S&P 500 insurance index dropped 3.5% to an over

six-month low. Insurance bellwether Travelers fell short

of analysts' estimates on quarterly revenue. The stock dropped

3%.

The KBW Regional banks index also shed 4.5% after

Zions Bancorp

disclosed

it would take a $50 million loss in the third quarter on

two commercial and industrial loans from its California

division.

A rally in chipmakers had lifted markets earlier in the

day after TSMC raised its full-year revenue forecast

on a bullish outlook for spending on artificial intelligence.

"It's just a period of uncertainty and of course the

closing of the federal government is continuing on and although

markets have been somewhat patient, at some point they will

relent," said Peter Andersen, founder of Andersen Capital

Management in Boston.

Wall Street's record rally on AI-driven optimism and

U.S. interest rate cuts bets sputtered after Sino-US tensions

flared up again on Friday over China's rare earth export curbs,

prompting investors to flee risk assets.

Wall Street's fear gauge