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Fed's preferred inflation PCE data due on Friday

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Nvidia ( NVDA ) on track for third straight declining session

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Meta gains after report of AI partnership talks with Apple ( AAPL )

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Indexes: Dow up 0.88%, S&P up 0.29%, Nasdaq down 0.26%

(Updated at 11:53 a.m. ET/1553 GMT)

By Ankika Biswas and Lisa Pauline Mattackal

June 24 (Reuters) -

The blue-chip Dow hit a one-month high in a broad-based

rally on Monday, as investors rotated out of AI-linked stocks,

while focus turned to a key inflation print later in the week to

sharpen bets around interest rate cuts this year.

Nvidia ( NVDA ) dropped 4.9%, sliding for the third day,

with market participants citing profit taking in the

semiconductor bellwether and other AI stocks following its

meteoric rise to the world's most valuable company last week.

Other chip stocks including U.S. shares of Taiwan

Semiconductor Manufacturing, Broadcom ( AVGO ), Marvell

Technology ( MRVL ) and Qualcomm ( QCOM ) dropped 2%-5%,

dragging the chip stocks index down 1.7%.

"The AI craze's starting to cool off a bit and

surprisingly with the potential for rates to go lower, you would

think it would be an additional boost and we're not seeing that.

From evaluation standpoint, they got extremely expensive," said

Phil Blancato, CEO of Ladenburg Thalmann Asset Management.

"If inflation comes in softer, the market could broaden

out quite significantly... The breadth will get wider and

everything beyond the AI stocks."

Technology was the only laggard among the 11

S&P 500 sector indexes, hitting a near two-week low.

The blue-chip Dow jumped over 1% intraday and was

on course for a five-day winning streak. The small-caps index

Russell 2000 also hit an over one-week high, in a sign of

broader market gains.

The biggest event on investors' radar for the week is

Friday's personal consumption expenditures (PCE) price index

report- the Federal Reserve's preferred measure of inflation,

expected to show a moderation in price pressures.

Market participants are still expecting about two rate cuts

this year, pricing in a 61% chance of a 25-basis-point cut in

September, as per LSEG's FedWatch.

The data comes against the backdrop of investors

weighing the moderation in recent inflation data against the

Fed's latest projection of one rate cut likely in December.

Investors also awaited remarks from Fed voting committee

member and San Francisco President Mary Daly during the day, in

light of the narrative of higher-for-longer interest rates

maintained by several Fed policymakers.

Other events lined up for the week include durable goods,

weekly jobless claims and final first-quarter GDP figures, the

annual Russell index reconstitution, and some quarterly

earnings.

Further, President Joe Biden will debate rival Donald Trump

in Atlanta on Thursday, with both neck-and-neck in national

opinion polls.

At 11:53 a.m. ET, the Dow Jones Industrial Average

was up 345.49 points, or 0.88%, at 39,495.82, the S&P 500

was up 15.86 points, or 0.29%, at 5,480.48, and the Nasdaq

Composite was down 45.18 points, or 0.26%, at 17,644.18.

Meta Platforms ( META ) rose 2% after a report that the

Facebook parent has discussed integrating its generative AI

model into Apple's ( AAPL ) recently announced AI system for

iPhones. Apple's ( AAPL ) shares also climbed 2.2%.

RXO leapt 23.3% on plans to buy United Parcel

Service's ( UPS ) Coyote Logistics business unit for $1.025

billion.

Advancing issues outnumbered decliners by a 2.91-to-1 ratio

on the NYSE and by a 1.59-to-1 ratio on the Nasdaq.

The S&P index recorded 31 new 52-week highs and one new low,

while the Nasdaq recorded 34 new highs and 78 new lows.