NEW YORK (REUTERS) - The Nasdaq was on pace for its biggest one-day drop in more than three months on Wednesday (Nov 29) as investors bailed out of high-flying tech stocks and shifted bets to banks and other pockets of the market that could benefit from improving economic conditions, lower regulations and taxes, and higher interest rates.

The S&P tech sector, which has propelled the market's record-setting rally this year, fell 2.7 percent and was on pace for its biggest daily drop in more than five months.

Shares of Amazon, Apple, Google parent Alphabet and Facebook were off between 2.5 per cent and 4 per cent. Among other high fliers this year, Netflix sank 6 per cent and the Philadelphia semiconductor index dropped 4.5 perc ent.

Financials rose 1.7 per cent, adding to Tuesday's gains and putting them on pace for their biggest two-day rise since just after the 2016 US election of President Donald Trump. JP Morgan rose 2 per cent and Wells Fargo climbed 2.1 per cent.

The industrial sector rose 0.8 per cent, led by transportation stocks such as Southwest Airlines, railroad Union Pacific and package delivery company UPS .

"We are certainly seeing a change in leadership at least for today in that we are taking profits from technology and redistributing those profits to areas that will benefit from lower taxes, less regulation, higher interest rates and kind of later stages of the economic cycle," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

Gains in financials, industrials and healthcare stocks gave the Dow industrials a modest gain and kept losses in check for the benchmark S&P 500.

The Dow Jones Industrial Average rose 94.78 points, or 0.4 per cent, to 23,931.49, the S&P 500 lost 2.61 points, or 0.10 per cent, to 2,624.43 and the Nasdaq Composite dropped 96.25 points, or 1.39 per cent, to 6,816.11.

Investors are keenly focused on tax-reform legislation in Congress, with hopes that a corporate tax cut would further fuel the record-setting rally in equities.

Congressional Republicans scrambled to reformulate their Bill to satisfy lawmakers worried about how much it would expand the federal deficit, as the measure moved toward a US Senate floor vote later this week.

In the latest batch of encouraging economic data, the US economy grew faster than initially thought in the third quarter, notching its quickest pace in three years.

Outgoing Federal Reserve chair Janet Yellen told Congressional leaders the US economy has gathered steam this year and will warrant continued interest rate increases amid a strengthened global recovery It was Yellen's final scheduled testimony on Capitol Hill. Her nominated replacement, Jerome Powell, on Tuesday had defended plans to potentially lighten regulation of the financial sector.

In corporate news, Chipotle Mexican Grill shares rose 4.5 per cent after the restaurant chain said it was seeking a turnaround expert to lead the company.

Declining issues outnumbered advancing ones on the NYSE by a 1.09-to-1 ratio; on Nasdaq, a 1.01-to-1 ratio favoured advancers.