*

Chip stocks end down for the week

*

Adobe drops after dour Q2 revenue forecast

*

Indexes: Dow down 0.5%, S&P 500 down 0.7%, Nasdaq down 1%

(Updates with final closing data, volume)

By Caroline Valetkevitch

NEW YORK, March 15 (Reuters) - U.S. stocks fell on

Friday, led by technology-related megacaps that have propelled

this year's rally, while investors weighed the interest rate

outlook ahead of next week's Federal Reserve meeting.

Traders have reined in bets of a June rate cut by the Fed

after this week's hotter-than-expected inflation data.

Shares of Adobe dropped 13.7%, a day after it

forecast second-quarter revenue below analysts' estimates,

citing competition and weak demand for its artificial

intelligence-integrated photography, illustration and video.

The S&P 500 technology index was down 1.3% on the

day, leading declines among sectors. Microsoft ( MSFT ) fell

2.1% and was among the biggest drags on the index.

An index of semiconductors was down 0.5% on Friday

and registered its biggest weekly percentage decline since early

January. The Nvidia GTC developer conference scheduled

for March 18 to 21 will be watched closely for AI-related

announcements.

"We seem in a period here where everyone knows rates

eventually will be lowered. The expectation of when it happens

keeps getting slightly pushed back, but investors still believe

it will happen," said Rick Meckler, partner at Cherry Lane

Investments in New Vernon, New Jersey.

"It's been a back-and-forth market as people reposition and

consider whether some of the real winners have just gone a

little bit too far, so you're seeing them trade off."

The Dow Jones Industrial Average fell 190.89 points,

or 0.49%, to 38,714.77. The S&P 500 lost 33.39 points, or

0.65%, at 5,117.09 and the Nasdaq Composite dropped

155.36 points, or 0.96%, to 15,973.17.

Major indexes registered slight declines for the week.

The Dow was down 0.02%, the S&P 500 was down 0.1% and the Nasdaq

was down 0.7%.

The small-cap Russell 2000 index fell 2.1% for

the week.

Friday also marked the simultaneous expiry of quarterly

derivatives contracts tied to stocks, index options and futures,

also known as "triple witching," which can boost volume.

Friday's volume was the year's highest by far on U.S.

exchanges, with 18.76 billion shares traded. The average volume

for a full session over the last 20 trading days was about 12.4

billion.

The week started with investors' options positions leaning

toward call contracts - typically bought to express a bullish

bias, said Brent Kochuba, founder of analytic service SpotGamma.

However, the S&P 500's failure to rise quickly eroded the value

of upside call options, putting further downward pressure on the

market, he noted.

While Wall Street's AI-driven rally has stalled, the S&P

500 remains up 7.3% for the year to date.

Among data released on Friday, production at U.S. factories

increased more than expected in February, but the January figure

was revised sharply down as manufacturing remains hamstrung by

higher interest rates.

Also, the University of Michigan's preliminary reading on

the overall index of consumer sentiment came in at 76.5 this

month, versus an estimated reading of 76.9.

All eyes are now on next week's Fed meeting and any clues on

the central bank's outlook for rate cuts.

Among other declining shares, Ulta Beauty ( ULTA ) fell 5.2%

after forecasting full-year profit below Wall Street estimates,

as elevated supply-chain costs and increased promotions hurt its

margins.

Advancing issues outnumbered decliners on the NYSE by a

1.11-to-1 ratio; on Nasdaq, a 1.12-to-1 ratio favored advancers.

The S&P 500 posted 27 new 52-week highs and no new lows; the

Nasdaq Composite recorded 53 new highs and 134 new lows.