*

U.S. PCE stands at 2.2% in Aug

*

Russell 2000 index up 1.5%

*

Bristol-Myers gains after schizophrenia drug approval

*

Costco slips after Q4 revenue misses estimates

*

Indexes: Dow up, S&P 500 down, Nasdaq down

(Updates to 4:00 PM ET)

By Echo Wang

Sept 27 (Reuters) - The blue-chip Dow Jones Industrial

Average closed at a record high on Friday as investors welcomed

a subdued inflation report that also lifted small-cap stocks

which stand to benefit from more interest rates cuts by the

Federal Reserve.

The technology-heavy Nasdaq slipped and the S&P 500 edged

slightly lower but both indexes stayed close to recent record

highs. All three Wall Street indexes logged their third

consecutive week of gains.

"The market at this point..(is) pretty much pricing in a

soft landing, and pricing in that we have defeated inflation,

and that the Fed will be able to lower rates without causing a

bunch of harm to the economy", said Liz Young Thomas, head of

investment strategy at SoFi in New York.

The Commerce Department reported a moderate rise in consumer

spending while inflation pressures continued to ease.

Separately, the University of Michigan's final September reading

on consumer sentiment came in at 70.1, surpassing economists'

expectations of 69.3, according to a Reuters poll.

According to preliminary data, the S&P 500 lost 7.64

points, or 0.13%, to end at 5,737.68 points, while the Nasdaq

Composite lost 73.41 points, or 0.40%, to 18,116.88. The

Dow Jones Industrial Average rose 130.51 points, or

0.31%, to 42,305.62.

The Russell 2000 index, which tracks small caps that

fare better in a low-rate environment, climbed to a one-week

high.

Shares of Nvidia ( NVDA ) slipped, weighing on the

technology-heavy Nasdaq.

Investors now slightly favor a 50-basis-point cut at the

Fed's next meeting with a 52.1% chance, up from a coin toss

before the data, as per the CME Group's FedWatch Tool.

Cooling price pressures prompted the Fed to cut rates by 50

bps last week. Focus will now shift to a slew of labor market

reports due next week.

Among individual stocks, Bristol-Myers Squibb ( BMY ) surged

after the U.S. FDA approved its schizophrenia drug.

Costco Wholesale ( COST ) dropped after posting downbeat

fourth-quarter revenue.

U.S.-listed shares of Chinese firms, including Alibaba ( BABA )

, PDD Holdings ( PDD ) and NetEase ( NTES ) gained

after China's central bank lowered interest rates and injected

liquidity into the banking system.

The optimism extended to miners, with Arcadium

gaining, and U.S.-listed shares of BHP also advancing.