Dec. 9 (Bloomberg) -- Japanese stock benchmarks slid, set for their biggest drops in three weeks. TDK Corp. and Mitsubishi Tokyo Financial Group Inc. fell after a government report showed machinery orders unexpectedly declined in October, adding to evidence growth in the world's second-largest economy is slowing.

The report on machinery orders came a day after a separate government report showed that Japan's economy expanded less than some economists expected in the third quarter.

``This is another in a string of disappointing numbers here in Japan,'' said Kirby Daley, a strategist at Societe Generale Securities' Fimat unit in Tokyo. ``This release definitely triggered a sell-off in stocks today.''

The Nikkei 225 Stock Average dropped 166.81, or 1.5 percent, to 10,774.56 at 2:34 p.m. in Tokyo. The Topix index slid 13.31, or 1.2 percent to 1086.38. Thirty-two of the 33 industry groups that make up the Topix declined.

Semiconductor-related shares including Tokyo Electron Ltd. and Advantest Corp. led the Nikkei's earlier decline after two U.S. chipmakers cut their sales forecasts.

Xilinx Inc. and Altera Corp., the world's largest makers of programmable chips, fell in extended trading after saying sales this quarter will drop more than expected as stockpiles rose. The forecasts came a day after Texas Instruments Inc. said its customers are continuing to reduce their chip inventory.

``I'm not as bullish now on technology stocks, especially after the negative news on Xilinx and Texas Instruments raised questions about the outlook for sales growth in the industry,'' said Soichiro Monji, who helps oversee $11 billion as senior strategist at Daiwa SB Investments Ltd. in Tokyo.

He declined to comment on his company's stockholdings.

Economic Concern

The largest members of the Nikkei and Topix indexes paced the market's drop. TDK, Japan's largest maker of magnetic parts for hard disk drives, fell 180 yen, or 2.4 percent, to 7,340. The stock is the largest constituent of the Nikkei.

Mitsubishi Tokyo, Japan's largest bank by market value, declined 33,000 yen, or 3.3 percent, to 959,000. Mizuho Financial Group Inc., the nation's largest bank by assets, dropped 10,000 yen, or 2.2 percent, to 448,000.

Fanuc Ltd., the world's largest maker of industrial robots, lost 120 yen, or 1.9 percent, to 6,270.

Private machinery orders excluding shipping and utilities dropped 3.1 percent, seasonally adjusted, from September, a government report released at 2 p.m. local time showed. The median forecast of 37 economists surveyed by Bloomberg News was for a 2.4 percent increase.

The economy grew at a revised 0.2 percent annual rate, a government report showed yesterday, less than the median forecast for 1.1 percent growth in a Bloomberg News survey of economists.

Faltering Recovery?

``After the GDP report, investors are more concerned that Japan's economic recovery may falter,'' said Monji. ``That's hurt sentiment for domestic-demand related shares.''

Tokyo Electron, the world's second-largest maker of chip- production equipment, fell 130 yen, or 2.2 percent, to 5,810. Advantest, the world's biggest maker of equipment used to test memory chips, lost 90 yen, or 1.1 percent, to 7,840.

In the U.S., Xilinx said third-quarter sales will fall 5 percent to 8 percent from the second quarter's $403.3 million.

Altera, its nearest rival, forecast a drop of as much as 12 percent in its fourth quarter. Xilinx dropped 7.7 percent, while Altera stock slumped 8.1 percent in after-hours U.S. trading.

Meanwhile, Texas Instruments, the world's biggest maker of mobile-phone processors, narrowed its fourth-quarter sales forecast because industrial customers for its chips continue to reduce inventory. The stock fell 3.9 percent yesterday.

Technology stocks globally had gained last week after Intel Corp., the world's largest chipmaker, raised its fourth-quarter sales forecast because of an unexpected pickup in demand for its processors. The update bolstered optimism that other technology companies would also give higher revenue forecasts.

``We've had some negative technology news including Xilinx that's weakened sentiment for the shares, tempering some optimism about the industry's outlook,'' said Yutaka Miura, a manager at Shinko Securities Co. in Tokyo.

To contact the reporter on this story: Michael Tsang in Tokyo at mtsang1@bloomberg.net.

Last Updated: December 9, 2004 00:46 EST