Large tech companies led stocks lower on Wednesday as investors digested disappointing China data ahead of a key US inflation report.

Shares of Amazon, Facebook parent Meta and Netflix all fell 1.5 percent or more as US stocks struggled for a second day in a row.

The Dow Jones finished down 0.5 percent at 35,123.

The S&P 500 shed 0.7 percent to 4,467, while the Nasdaq dropped 1.2 percent to 13,722.

China slipped into deflation for the first time in more than two years in July, official data showed, as slowing domestic spending weighs on the post-Covid economic recovery.

The China data comes ahead of Thursday's closely watched consumer price index data in the United States, which is seen as influential in Federal Reserve monetary policy.

Penn Entertainment jumped 9.1 percent after it announced a deal with Disney's ESPN to create a branded sportsbook for US audiences as both companies try to monetise sports-betting.

Disney dipped 0.7 percent, while DraftKings, which offers sports betting, sank 10.9 percent.

Lyft slid 10 percent as the ride-hailing company reported a loss of US$114.3 million. Analysts cited concerns about the company's lagging profitability compared with rival Uber. (AFP)