US STOCKS-Dell warning on spending, oil weigh on Wall St

* Dell, Marvell pressure tech sector

* Oil up on Tropical Storm Gustav concerns

* Nasdaq down 1.8 pct; Dow off 1.2 pct; S&P down 1 pct (Updates to afternoon, changes byline)

By Steven C. Johnson

NEW YORK, Aug 29 (Reuters) - U.S. stocks tumbled on Friday as the price of oil rose and a warning by computer maker Dell that companies worldwide are cutting back on technology spending spooked that sector.

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 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.

Dell Inc's (DELL.O: Quote, Profile, Research, Stock Buzz) comments about technology spending sparked fears of weakness in the whole tech sector, as did the company's surprisingly steep fall in quarterly profit.

Shares of Dell, the world's second-largest computer maker, fell 13 percent, with other tech shares such as International Business Machines Corp (IBM.N: Quote, Profile, Research, Stock Buzz) also declined.

Chipmakers were under pressure after diversified U.S. chipmaker Marvell Technology Group Ltd (MRVL.O: Quote, Profile, Research, Stock Buzz) gave a conservative outlook for the third quarter, sending its shares down nearly 4 percent. The tech-heavy Nasdaq fell 2 percent.

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

The Dow Jones industrial average .DJI was down 151.60 points, or 1.29 percent, at 11,563.58. The Standard & Poor's 500 Index .SPX was down 14.74 points, or 1.13 percent, at 1,285.94. The Nasdaq Composite Index .IXIC was down 47.05 points, or 1.95 percent, at 2,364.59.

Shares of companies sensitive to higher fuel costs, such as retailers and airlines, slipped as oil rose above $118 a barrel. Tropical Storm Gustav was poised to strengthen and 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.

Shares of Marvell Technology Group, 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 5 percent to $14.02. The company said it is still unsure of the impact of a weakening U.S. economy.

An index of semiconductor stocks fell 3 percent, while an index of retail stocks dropped 0.5 percent.  Continued...