Aug. 29 (Bloomberg) -- U.S. stocks fell, paring the biggest monthly gain since April, as consumer spending slumped and lower- than-estimated earnings from Dell Inc. dragged down technology companies.

Starbucks Corp. and Amazon.com Inc. each lost more than 2 percent in Nasdaq Stock Market trading after the government said growth in spending slowed to 0.2 percent in July as incomes decreased 0.7 percent. Dell, the second-biggest personal-computer maker, posted its biggest drop since 2000. Constellation Energy Group Inc. declined 2.6 percent and helped drive all 31 utility companies in the Standard & Poor's 500 Index lower after Jefferies Group Inc. said the largest U.S. power marketer may have to sell more shares.

The S&P 500 slipped 17.85 points, or 1.4 percent, to 1,282.83, ending a three-day advance. The Dow Jones Industrial Average lost 171.22, or 1.5 percent, to 11,543.96. The Nasdaq Composite Index retreated 44.12 to 2,367.52. Three stocks fell for each that rose on the New York Stock Exchange.

``The environment remains challenged for the equity market,'' Mike Ryan, head of wealth management research for the Americas at UBS Financial Services Inc., told Bloomberg Television. ``As we're faced with the impact of higher energy costs and the lack of availability of credit, that's going to put more pressure on the consumer sector.''

Tech Leads Drop

Technology shares led stocks lower as the Commerce Department report also said prices excluding food and energy, the Federal Reserve's preferred gauge, climbed 2.4 percent on a yearly basis. The data overshadowed a better-than-forecast reading of 63 in the Reuters/University of Michigan consumer sentiment index and damped optimism spurred by better-than- estimated growth in gross domestic product yesterday and an unexpected increase in orders for durable goods on Aug. 27.

The Morgan Stanley Cyclical Index, a gauge of companies that rely the most on economic expansion to boost profits, lost 1 percent today as 26 of its 30 stocks fell. The index jumped 2.5 percent yesterday for its steepest advance in three weeks. led by a 48 percent jump in Advanced Micro Devices Inc.

About 959 million shares changed hands on the NYSE, 36 percent below the average for the year. Trading volume had set new lows for the year for five straight days before yesterday. U.S. markets will be closed on Sept. 1 for the Labor Day holiday.

The S&P 500 gained 1.2 percent in August, snapping a two- month retreat that sent the measure to an almost three-year low on July 15. The gain was fueled by a more than 20 percent drop in oil from a record, a jump in the dollar and growing speculation that the worst of banks' mortgage losses are over.

Starbucks, the biggest coffee-shop chain, slid 2.6 percent to $15.56, while Amazon, the largest Internet retailer, fell 3.1 percent to $80.81.

`Continued Conservatism'

Dell sank 14 percent to $21.73. The company said ``continued conservatism'' from some U.S. customers is spreading to western Europe and some Asian countries. Sales growth in those areas slowed last quarter and profit missed analysts' projections after Dell reduced prices.

Apple Inc., the maker of the iPod media player and Macintosh computer, lost 2.4 percent to $169.53 for the biggest drop in a month. Microsoft Corp. retreated 2.3 percent to $27.29, while Intel Corp., the largest chipmaker, slumped 3.1 percent to $22.87. Technology companies collectively fell 2.5 percent, the most in two months, for the steepest.

`A Hard Time'

``Anything that's related to the consumer is going to have a hard time and is more than likely going to miss expectations,'' said Tom Wirth, senior investment officer at Chemung Canal Trust Co. in Elmira, New York, which manages $1.8 billion. Weakness in technology stocks ``has to do with the consumer having to rein in their spending.''

Marvell Technology Group fell 4.4 percent to $14.11 after the maker of chips for Apple Inc.'s iPhone predicted sales in the current quarter of $860 million to $880 million, missing the $889.2 million estimated by analysts in a Bloomberg survey.

The S&P 500 Utilities Index dropped 1.9 percent for its steepest loss in almost three weeks.

Constellation Energy Group Inc. fell 2.6 percent to $66.71. The company was cut to ``underperform'' from ``hold'' by Jefferies analysts, who also lowered their estimate for 2009 earnings.

International Paper Co. sank 4.4 percent to $27.05, the biggest drop in three months, after Deutsche Bank AG cut the world's largest maker of office paper to ``hold'' from ``buy.''

Fannie Falls

Fannie Mae fell for the first time this week, losing 14 percent to $6.84. Freddie Mac had the biggest drop in the S&P 500, losing 15 percent to $4.51. Bank of China Ltd., the nation's third-largest bank, pared holdings of corporate debt from the two largest U.S. mortgage-finance companies in the past two months amid concern over the potential need for a U.S. government bailout. Separately, the Washington Post reported that Freddie Mac's capital cushion may not be enough to cover losses.

PetSmart Inc. rose the most since 2003, climbing 11 percent to $27. The largest U.S. pet-store chain said second-quarter profit fell less than analysts estimated, helped by increased boarding and grooming sales for dogs and cats.

The S&P 500 and the Dow average both fell 0.7 percent this week. The Nasdaq Composite Index dropped 2 percent for the week.

The S&P 500 completed only its third monthly advance since reaching a record in October. It is still down 13 percent this year.

The S&P 500's August gain was led by so-called consumer discretionary companies, which include retailers, automakers, lodging companies and restaurant chains. The S&P 500 Consumer Discretionary Index rallied 7 percent this month for the best gain among 10 industries through yesterday

An index of telephone shares in the S&P 500 had the second- best return in August with a 3.6 percent rally. Frontier Communications Corp. led the advance with an 8.7 percent jump.

To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

Last Updated: August 29, 2008 16:49 EDT