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By Johann M Cherian and Sukriti Gupta

Feb 28 (Reuters) - Wall Street's main indexes were mixed in choppy trading on Friday as investors avoided large bets after data showed consumer spending fell in January, exacerbating worries that the world's largest economy might be stalling.

A Commerce Department report showed that inflation rose in line with expectations in the previous month. However, consumer spending, which accounts for more than two-thirds of the economy, dropped 0.2% after an upwardly revised 0.8% increase in December.

"Spending came in lower than we were looking for... most of it I would attribute to a cooling economy, which presents a dilemma for the Fed in the sense that you still have inflation and you have an economy that is moving lower. If you add them together, that equals stagflation," Peter Cardillo, chief market economist at Spartan Capital Securities.

Friday's report is important for investors trying to gauge the central bank's next policy move, after policymakers reiterated a hawkish stance on interest rates. The fear has been that the new Donald Trump administration's policies, especially trade restrictions, could lead to a rise in domestic inflation.

Traders see the Fed lowering borrowing costs twice by December, little changed from before the report, according to data compiled by LSEG. Investors will assess comments from Chicago Fed President Austan Goolsbee later in the day.

At 10:06 a.m. ET, the Dow Jones Industrial Average .DJI rose 204.26 points, or 0.47%, to 43,443.76, the S&P 500 .SPX gained 6.10 points, or 0.10%, to 5,867.67 and the Nasdaq Composite .IXIC lost 47.51 points, or 0.26%, to 18,490.55.

Sectors that fare better in times of economic uncertainties such as consumer staples .SPLRCS and utilities .SPLRCU rose about 1% each. On the flip side, technology stocks .SPLRCT limited gains.

The CBOE Volatility Index .VIX, also known as Wall Street's fear gauge, touched a one-month high and was last up at 21.26 points.

Multiple recent reports suggesting a stalling economy and concerns that tech companies such as Nvidia NVDA.O and Microsoft MSFT.O might be overspending on artificial-intelligence infrastructure have put Wall Street's main indexes on track for monthly declines.

The benchmark S&P 500 .SPX logged declines in five of the past six sessions and is set for its biggest one-month drop since April 2024. The tech-heavy Nasdaq .IXIC is down about 9% from its all-time high and is headed for its steepest one-month fall since September 2023.

Nvidia fell 1.9% after an 8.5% slide in the previous session, after the chip giant's weaker-than-expected quarterly gross margin forecast overshadowed an upbeat revenue outlook.

Dell DELL.N lost 5.7% as the PC maker forecast a decline in its adjusted gross margin rate for fiscal 2026.

Peer HP Inc HPQ.N fell 6.6% after its quarterly profit forecasts missed expectations.

Trump's latest threat to slap an extra 10% duty on imports from China hit U.S.-listed China stocks such as Alibaba BABA.N and Xpeng XPEV.N, which fell 3.2% and 6.5%, respectively.

NetApp NTAP.O plunged 11.3% after the data storage firm lowered its annual results forecast.

Walgreens WBA.O fell 4.8% after a report said private equity firm Sycamore Partners is closing in to buy out the pharmacy chain.

Advancing issues outnumbered decliners by a 1.46-to-1 ratio on the NYSE, while declining issues outnumbered advancers by a 1.24-to-1 ratio on the Nasdaq.

The S&P 500 posted 27 new 52-week highs and 10 new lows, while the Nasdaq Composite recorded 21 new highs and 228 new lows.

(Reporting by Johann M Cherian and Sukriti Gupta in Bengaluru; Editing by Pooja Desai and Maju Samuel)

((johann.mcherian@thomsonreuters.com;))