(Updates with afternoon trading)

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US reports solid July consumer spending

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Dell, Marvell ( MRVL ) fall after dour quarterly forecasts

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Caterpillar ( CAT ) falls after forecasting bigger 2025 tariff hit

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S&P 500 -0.68%, Nasdaq -1.18%, Dow -0.27%

By Johann M Cherian and Noel Randewich

Aug 29 (Reuters) - The S&P 500 fell from record highs on

Friday, with losses in Dell, Nvidia ( NVDA ) and other AI-related stocks,

while investors parsed inflation data showing tariffs have

started feeding into prices.

Dell tumbled 9.4% and was among the deepest decliners

in the S&P 500 after high manufacturing costs for AI-optimized

servers and intensifying competition overshadowed the company's

bullish demand forecast for artificial intelligence

infrastructure. The S&P 500 technology sector index

shed 1.7%.

Nvidia ( NVDA ) lost 3.3%, down for a third straight day. The AI

heavyweight's quarterly report on Wednesday fell short of

investors' high expectations but confirmed that spending related

to artificial intelligence infrastructure remains strong.

"Today is just weakness in the top of the market, in tech,"

said Zachary Hill, head of portfolio management at Horizon

Investments in Charlotte, North Carolina. "This is not the first

time that we've had some worries about over-investment in AI,

lack of monetization opportunities and that type of thing."

U.S. consumer spending increased by the most in four months in

July while services inflation picked up, but economists did not

believe the signs of strong domestic demand would prevent the

Federal Reserve from cutting interest rates next month against a

backdrop of softening labor market conditions. The report from

the Commerce Department on Friday showed mild price pressures

from tariffs on imports.

A U.S. tariff exemption for package imports valued under $800

also ended on Friday, raising costs for businesses and, in turn,

consumers.

Traders widely expect the Fed will cut interest rates by 25

basis points at its September meeting.

"Even if we see an uptick in inflation, which it looks like

we are, the Fed may look past that, given that this is going to

be tariff-related and temporary," said Jim Smigiel, chief

investment officer at SEI.

The U.S. stock market will be closed on Monday for the Labor

Day holiday.

Expectations of interest rate cuts have helped put the

benchmark S&P 500 and the blue-chip Dow on track for their

fourth straight month of gains, while the tech-heavy Nasdaq was

poised to log its fifth consecutive monthly rise.

U.S. shares of Alibaba soared 13% and were among the

most traded on Wall Street after the Chinese company reported

stronger-than-expected quarterly growth in its cloud computing

business, driven by AI-related demand.

The S&P 500 was down 0.68% at 6,457.45 points after notching

a record-high close on Thursday.

The Nasdaq declined 1.18% to 21,448.87 points, while the

Dow Jones Industrial Average was down 0.27% at 45,513.35 points.

Fed Governor Christopher Waller, a candidate for the central

bank's top job, said on Thursday he wants to start cutting rates

next month, in line with President Donald Trump's calls to lower

borrowing costs.

The Russell 2000 index of smaller companies dipped

0.6% on Friday and was on track for a nearly 7% gain in August.

A court hearing on Trump's attempt to fire Federal Reserve

Governor Lisa Cook ended on Friday with no immediate ruling from

the judge hearing the unprecedented legal fight, meaning the

U.S. central bank policymaker will remain in place for now.

Chipmaker Marvell slumped 18% after forecasting

quarterly revenue below expectations.

Global economy bellwether Caterpillar ( CAT ) lost about 4%, a

day after the heavy-equipment maker forecast higher

tariff-related expenses for 2025.

Advancing issues outnumbered falling ones within the S&P 500

by a 1.2-to-one ratio.

The S&P 500 posted 21 new highs and no new lows; the Nasdaq

recorded 68 new highs and 61 new lows.