* Nikkei below 25-day moving avg, fall below 10,000 unlikely
* Nikkei ripe for profit-taking after 53% climb since March
* Financial shares drop amid broad sell-off, retailers down
* Elpida tumbles, but Fast Retailing pares losses
By Elaine Lies
TOKYO, Sept 2 (Reuters) - Japan's Nikkei stock average fell 2.4 percent on Wednesday, with exporters hit by a stronger yen and financial shares down amid a broad selloff sparked partly by worries about the health of the U.S. financial system. Elpida Memory plunged 16 percent after Japan's sole maker of PC memory said it would issue new shares to raise up to $844 million, while retailers lost ground after Seven & I Holdings cut its annual operating profit forecast.
Concerns about the U.S. financial sector were reignited after Sanford C. Bernstein Research cut American International Group to "underperform" from "market perform", and said there was no reason for shareholders to continue owning the stock, leading it to plummet on Tuesday and pushing Wall Street lower.
"Wall Street rose fairly strongly on belief that the financial system was fine, but the recent highs were probably the limit," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"The question now is whether Wall Street will consolidate at this level or fall further. The Nikkei will take its cues from those moves."
Other market players said the Nikkei, which on Monday hit an 11-month high of 10,767, a level some 53 percent above its March lows, was ripe for profit-taking.
"Certainly indicators in various nations have been improving, but the fact that markets have been falling despite this suggests that a bit of downward adjustment may be in the offing," said Noritsugu Hirakawa, a strategist at Oksasan Securities.
In a possible sign of this, the Nikkei broke below its 25-day moving average, which currently comes in around 10,400 and had been acting as a support for around the last week.
The benchmark shed 249.60 points to 10,280.46, after falling as much as 2.9 percent. The broader Topix lost 2 percent to 949.81.
"The fall below the 25-day moving average is probably only temporary, but does hint at some adjustment," said Hirakawa.
"Still, at this point there's nothing bad enough to take it below 10,000, which I think will hold for a while."
STOCK SCEPTICISM
The S&P 500 fell 2.2 percent on Tuesday to 998.04 as scepticism that stocks can add to a nearly 50 percent rally over the last six months prevailed in the market.
The fall came despite data showing the Institute for Supply Management's (ISM) closely watched barometer of U.S. factory activity jumped to 52.9 from 48.9 in July, the highest level since June 2007.
The dollar pared losses to stand flat at 92.87 yen. Earlier, the Japanese currency had spiked to a seven-week high against the greenback and the euro as renewed fears about the financial sector made investors cautious about riskier assets.
Among exporters, Canon Inc lost 2.8 percent to 3,500 yen. Advantest Corp, a chip-tester maker, shed 2.5 percent to 2,310 yen and electronics parts maker Kyocera Corp declined 1.4 percent to 7,630 yen.
Elpida tumbled to 1,285 yen after saying it plans to float up to 55 million new shares, increasing the number of its common shares by 39 percent, to help it keep pace with technology advances at South Korean rivals Samsung Electronics and Hynix Semiconductor.
While retailers remained weak, Fast Retailing, the operator of the Uniqlo casual clothing chain, pared losses saying sales could reach 1 trillion yen ($10.8 billion) in the year to August 2010 if it can clinch an acquisition.
Fast Retailing shed 3.1 percent to 10,500 yen while Seven & I Holdings, Japan's largest retailer, sank 2.7 percent to 2,170 yen after it cut its full-year operating profit forecast by 12 percent as a cool summer exacerbated weak consumer spending.
Mitsubishi UFJ Financial Group, Japan's largest bank, lost 2.5 percent to 580 yen, while Sumitomo Mitsui Financial Group shed 2.7 percent to 3,900 yen.
One of the few bright spots was Yoshimoto Kogyo, one of Japan's largest talent agencies, which soared 16 percent to 1,251 yen after the Yomiuri daily reported details of a prospective buyout by a consortium of some 20 companies, echoing a report by Reuters in July..
Trade was active, with 1.96 billion shares changing hands on the Tokyo exchange's first section compared to last week's daily average of 1.91 billion.
Advancing shares outpaced declining ones by 10 to 1. (Reporting by Elaine Lies; Editing by Edwina Gibbs)