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TSMC reverses course after upbeat results

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Domino's Pizza slumps after Q2 same-store sales miss

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Warner Bros Discovery ( WBD ) jumps on report of mulling break-up

plan

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Jobless claims higher than expected

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Indexes down: Dow 0.62%, S&P 0.68%, Nasdaq 1.02%

(Updated at 12:08 p.m. ET/1608 GMT)

By Lisa Pauline Mattackal and Ankika Biswas

July 18 (Reuters) -

Wall Street's major indexes reversed early gains on Thursday

after a brief rebound in chip and megacap stocks fizzled out, as

investors rotated out of high-priced tech stocks and into

underperforming sectors.

U.S.-listed shares of Taiwan Semiconductor Manufacturing

fell 2.8%, dragging the Philadelphia SE Semiconductor

index down 0.6% and putting it on track for a second

consecutive session of declines after a steep sell-off in both

chips and megacap technology shares on Wednesday.

Semiconductor and megacap stocks initially looked to

recoup losses after TSMC raised its

full-year revenue forecast, but reversed course as investors

continued to move out of heavily weighted megacap growth stocks

into small caps.

"We had a snapback rally because of TSMC this morning,

but the tech trade is crowded. Everybody who's overweight (on)

tech stocks was using the opportunity to lighten up, and then

they all (tech stocks) started going red," said Dennis Dick,

trader at Triple D Trading.

Microsoft ( MSFT ), Amazon.com ( AMZN ), Apple ( AAPL )

and Alphabet reversed earlier gains, falling between

1.7% and 2.9%.

The small-cap Russell 2000 also pulled back 0.7%,

set for a second session of declines after a five-day rally.

"It was a little too much, too fast for the Russell.

Nothing goes straight up, but it's all about rotation," Dick

said, adding that small caps will continue to perform well in

the coming weeks as investors anticipate monetary policy easing.

Elsewhere, the Labor Department reported jobless claims rose

to 243,000 for the week ended July 13 - higher than previously

forecast - another signal that the jobs market was cooling.

Traders slightly raised bets on a 25-basis-point rate

cut from the Federal Reserve by September to over 95%, according

to CME's FedWatch, despite much stronger than expected

manufacturing data

from the Federal Reserve Bank of Philadelphia.

Investors also assessed corporate earnings, with

Domino's Pizza slumping 12.8% after falling short of

estimates for quarterly same-store sales.

Homebuilder D.R. Horton ( DHI ) jumped 11% to an

all-time high after reporting higher quarterly profit and a

$4-billion share buyback plan. The move also lifted the PHLX

Housing index to a record high.

Chipmakers Nvidia and Intel ( INTC ) bucked

sectoral declines, gaining 0.9% and 4.2%, respectively.

The S&P 500 Energy index led sectoral gains,

while the Healthcare index was dragged by a 7.2% loss

in Eli Lilly ( LLY ).

Comments from Fed officials Lorie Logan, Mary Daly and

Michelle Bowman are also expected later in the day.

At 12:08 a.m. ET, the Dow Jones Industrial Average

was down 257.34 points, or 0.62%, at 40,940.74, the S&P 500

was down 37.93 points, or 0.68%, at 5,550.34, and the

Nasdaq Composite was down 184.34 points, or 1.02%, at

17,812.59.

Warner Bros Discovery ( WBD ) jumped 6.3% after a report

that the CNN and HBO owner had discussed a plan to split its

digital streaming and studio businesses from its legacy TV

networks.

Netflix ( NFLX ) slipped 1.1% ahead of its results, due

after markets close.

Declining issues outnumbered advancers for a 1.44-to-1

ratio on the NYSE, and for a 1.98-to-1 ratio on the Nasdaq.

The S&P index recorded 76 new 52-week highs and one new low,

while the Nasdaq recorded 152 new highs and 30 new lows.