Updates to 4:45 pm ET

By Isla Binnie

NEW YORK, July 18 (Reuters) -World stock indexes fell on Thursday as a selling mood around high-priced technology stocks crept into the rest of the market, while the dollar index gained after strong U.S. economic data.

Japan's yen sagged after scaling a six-week high, while the euro eased after ECB President Christine Lagarde held off any interest rate change but said a decision at the ECB's next meeting in September was "wide open".

The Dow Jones Industrial Average .DJI closed down 533.06 points, or 1.29%, at 40,665.02, halting a series of consecutive closing highs. The S&P 500 .SPX lost 43.68 points, or 0.78%, to 5,544.59.

All of the major S&P 500 indexes ended lower, except for energy .SPNY, which was up 0.3%.

The Nasdaq Composite .IXIC lost 125.70 points, or 0.70%, to 17,871.22, giving back early gains. It had initially recovered from Wednesday's session, its worst since December 2022 .N. Europe's STOXX 600 .STOXX index fell 0.16%.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 6.64 points, or 0.81%, to 816.95. The STOXX 600 .STOXX index fell 0.16%.

"The technology sell-off seems to be spreading to the rest of the market," said Gene Goldman, chief investment officer at Cetera Investment Management in California.

Goldman and others said investors had already factored in good news, including expectations the Federal Reserve would cut interest rates in September and that a recession would likely be avoided.

Anticipation of further comments from Republican presidential candidate Donald Trump later on Thursday at the Republican National Convention could add to nervousness, Goldman said.

"He may suggest more tariffs, which is a concern for technology companies," Goldman said.

DATA BOOSTS DOLLAR

In the foreign exchange market, the dollar index advanced after strong U.S. manufacturing data and jobless data that did little to suggest a significant slowing in the labor market.

The dollar index =USD, gained 0.5% at 104.19, after hovering close to its weakest level in four months. The euro EUR= was down 0.37% at $1.0896, easing from a four-month high on Wednesday.

Initial claims for U.S. state unemployment benefits increased 20,000 to a seasonally adjusted 243,000 for the week ended July 13, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week, although the data was not considered to be a notable shift in the labor market due to seasonal factors.

A closely watched part of the Treasury yield curve steepened as the uptick in unemployment claims added to the view that the Fed is likely to begin cutting interest rates in September.

Interest rate sensitive two-year yields US2YT=RR were last up 3.4 basis points on the day at 4.463% and benchmark 10-year yields US10YT=RR rose 4.4 basis points to 4.19%.

The yield curve between two-year and 10-year notes US2US10=TWEB steepened one basis point on the day to minus 27 basis points.

Investors now view the Fed cutting interest rates as a sure bet. FEDWATCH

"The market thinks it's more likely there will be the first Fed rate cut in September if inflation continues to go in the right direction," said JoAnne Bianco, investment strategist at BondBloxx, which is based in Larkspur, California.

The yen came off its highs after daily data showed little fresh evidence of intervention from authorities. It JPY= weakened 0.75% against the greenback at 157.36 per dollar.

The yen has dropped sharply against the dollar this year as the wide interest rate difference between the U.S. and Japan weigh, creating a lucrative trading opportunity, in which traders borrow the yen at low rates to invest in dollar-priced assets for a higher return, known as carry trade.

Rate cut expectations kept gold XAU= near record levels during the session, although it eased later to $2,441.61 an ounce.

Oil rose throughout the day before steadying. Brent crude futures settled higher, up 3 cents at $85.11 a barrel, but U.S. crude CLc1 slipped 3 cents to $82.82 per barrel.

Additional reporting by Sinead Carew and Caroline Valetkevitch in New York; Editing by Susan Fenton and Stephen Coates

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