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

* Dell, Marvell outlooks pressure tech sector

* Oil up on Tropical Storm Gustav concerns

* Nasdaq down 1.6 pct; Dow off 1.1 pct; S&P down 0.9 pct (Updates with oil turning flat)

By Steven C. Johnson

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

Economic data added to 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, and 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 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 124.49 points, or 1.06 percent, at 11,590.69. The Standard & Poor's 500 Index .SPX was down 12.04 points, or 0.93 percent, at 1,288.64. The Nasdaq Composite Index .IXIC was down 38.73 points, or 1.61 percent, at 2,372.91.

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 further in the afternoon.

Stocks pared some losses in midafternoon after the price of oil eased to $116.16 per barrel, still up 0.5 percent but off an earlier high above $118.

But investors remained nervous about Tropical Storm Gustav and its possible impact on U.S. offshore oil and gas installations in the Gulf of Mexico.

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...