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Disappointing Dell earnings, oil weigh on Wall Street

Reuters - Saturday, August 30

By Kristina Cooke

NEW YORK - Stocks fell on Friday after the previous session's sharp gains, as the price of oil rose and computer maker Dell posted a surprisingly steep drop in quarterly earnings.

Economic data added to the market jitters heading into the long Labor Day weekend. A government report before the opening bell showed U.S. personal income tumbled unexpectedly in July and spending slowed as the effects of a government stimulus package wore off and an inflation measure hit a 17-year high.

Dell Inc's <DELL.O> comments that companies worldwide are cutting back on technology spending sparked fears of weakness in the whole tech sector. Shares of the world's second-largest computer maker fell 12 percent, with other tech shares such as International Business Machines Corp <IBM.N> also declining.

Shares of companies sensitive to higher fuel costs, such as retailers and airlines, tumbled as oil rose above $118 a barrel. Tropical Storm Gustav was poised to enter the Gulf of Mexico, raising concerns about its impact on U.S. offshore oil and gas output.

"Today we're being influenced primarily because oil is up $2 ahead of a long weekend. Investors are very nervous," said Al Goldman, chief market strategist at Wachovia Securities in St. Louis.

The U.S. bond market was set to close early on Friday ahead of the Labor Day holiday, and Goldman noted that stock trading volume was likely to thin even further in the afternoon.

The Dow Jones industrial average <.DJI> fell 73.85 points, or 0.63 percent, to 11,641.33, while the Standard & Poor's 500 Index <.SPX> slipped 7.95 points, or 0.61 percent, to 1,292.73. The Nasdaq Composite Index <.IXIC> was down 30.00 points, or 1.24 percent, at 2,381.64.

Chipmakers were under pressure after diversified U.S. chipmaker Marvell Technology Group Ltd <MRVL.O> gave a conservative outlook for the third quarter, sending its shares down 3.7 percent to $14.21.

Marvell, whose chips are used in Apple's <AAPL.O> iPhone and Research In Motion Ltd's <RIM.TO> BlackBerry, said it is still uncertain of the impact of the weakening U.S. economy. An index of semiconductor stocks <.SOXX> fell nearly 2 percent.

An index of airline stocks <.XAL> fell 1.9 percent, while an index of retail stocks <.RLX> dropped almost 1.1 percent.

Dell shares fell 12.2 percent to $22.14. IBM shares dropped 1.1 percent to $123.23.

There were some bright spots in 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 confidence, meanwhile, showed confidence recovered somewhat from depressed levels helped by moderating gasoline prices.

(Additional reporting by Herb Lash; Editing by James Dalgleish)

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