US STOCKS-Wall St tumbles as Dell warns on tech spending

* Dell, Marvell outlooks pressure tech sector

* U.S. personal income, spending data weigh on shares

* Nasdaq down 1.8 pct; Dow off 1.5 pct; S&P down 1.4 pct (Updates to close)

By Steven C. Johnson

NEW YORK, Aug 29 (Reuters) - U.S. stocks tumbled on Friday, led lower by tech shares after computer maker Dell warned that companies worldwide are cutting back on technology spending.

Nevertheless, the market managed to end August in positive territory as oil continued a sharp slide started in July.

On Friday, all three major indexes fell more than 1 percent, with the Nasdaq chalking up the biggest losses after Dell Inc's (DELL.O: Quote, Profile, Research, Stock Buzz) comments sparked fears about weakness in the whole tech sector. Shares of Dell, the world's second-largest computer maker, fell nearly 14 percent, and other tech shares such as International Business Machines Corp (IBM.N: Quote, Profile, Research, Stock Buzz), also declined.

All 30 stocks in the Dow industrials finished in the red on Friday.

Economic data added to the market's jitters ahead of the long Labor Day weekend. A government report showed U.S. personal income fell unexpectedly in July while spending slowed as the effects of a government stimulus package wore off. An inflation measure hit a 17-year high.

"The market is just very fragile. There's not a lot of support going into the Labor Day weekend," said Gary Wolfer, senior portfolio manager at Univest Wealth Management & Trust in Souderton, Pennsylvania. "The Dell news has compounded the downside move. When you have a non-financial company missing its earnings, that's disconcerting to the market."

The Dow Jones industrial average .DJI was down 171.47 points, or 1.46 percent, at 11,543.71. The Standard & Poor's 500 Index .SPX was down 17.93 points, or 1.38 percent, at 1,282.75. The Nasdaq Composite Index .IXIC> was down 44.12 points, or 1.83 percent, at 2,367.52.

For the month, though, the Dow added 1.5 percent, while the S&P rose 1.3 percent and the Nasdaq gained 1.8 percent.

The U.S. bond market closed early on Friday ahead of the Labor Day holiday, contributing to thin trading volume.

Chipmakers further pressured the Nasdaq after diversified semiconductor company Marvell Technology Group Ltd (MRVL.O: Quote, Profile, Research, Stock Buzz) gave a conservative outlook for the third quarter.

Oil CLc1 settled down 13 cents at $115.46 per barrel even as energy companies began shutting output in the Gulf of Mexico as Hurricane Gustav approached the region. Earlier, oil had surged above $118.

The pullback was not enough to lift equities, though, particularly the troubled tech sector. Shares of Marvell Technology, whose chips are used in Apple's (AAPL.O: Quote, Profile, Research, Stock Buzz) iPhone and Research In Motion Ltd's (RIM.TO: Quote, Profile, Research, Stock Buzz) BlackBerry, fell 4.4 percent to $14.11. The company said it is still unsure of the impact of a weakening U.S. economy.

An index of semiconductor stocks fell 2.8 percent, while an index of retail stocks .RLX dropped 1.1 percent.

Dell shares fell 13.8 percent to $21.73 after its spending warning. Earlier this week, the company reported a surprisingly steep fall in quarterly profit.

IBM shares dropped 2.3 percent to $121.73.

There were some bright spots among the economic data, however. Business activity in the U.S. Midwest expanded strongly in August as new orders jumped, the Institute for Supply Management-Chicago business barometer showed, even as the rate of hiring plummeted to a four-month low.

The Reuters/University of Michigan report on consumer sentiment, meanwhile, showed confidence recovered somewhat from depressed levels, helped by moderating gasoline prices.

Trading volume was light on the New York Stock Exchange, with about 915 million shares changing hands, well below last year's estimated daily average of roughly 1.90 billion. On Nasdaq, about 1.56 billion shares traded, also below last year's daily average of 2.17 billion.

Declining stocks outnumbered advancing ones by about 1.7 to 1 while on the Nasdaq, advancers beat decliners by about 1.8 to 1. (Additional reporting by Kristina Cooke; Editing by Leslie Adler)