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* Fed's preferred inflation PCE data due on Friday

* Nvidia on track for third straight declining session

* Meta gains after report of AI partnership talks with Apple

* Indexes: Dow up 0.88%, S&P up 0.29%, Nasdaq down 0.26%

June 24 (Reuters) -

The blue-chip Dow hit a one-month high in a broad-based rally on Monday, as investors rotated out of AI-linked stocks, while focus turned to a key inflation print later in the week to sharpen bets around interest rate cuts this year.

Nvidia dropped 4.9%, sliding for the third day, with market participants citing profit taking in the semiconductor bellwether and other AI stocks following its meteoric rise to the world's most valuable company last week.

Other chip stocks including U.S. shares of Taiwan Semiconductor Manufacturing, Broadcom, Marvell Technology and Qualcomm dropped 2%-5%, dragging the chip stocks index down 1.7%.

"The AI craze's starting to cool off a bit and surprisingly with the potential for rates to go lower, you would think it would be an additional boost and we're not seeing that. From evaluation standpoint, they got extremely expensive," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.

"If inflation comes in softer, the market could broaden out quite significantly... The breadth will get wider and everything beyond the AI stocks."

Technology was the only laggard among the 11 S&P 500 sector indexes, hitting a near two-week low.

The blue-chip Dow jumped over 1% intraday and was on course for a five-day winning streak. The small-caps index Russell 2000 also hit an over one-week high, in a sign of broader market gains.

The biggest event on investors' radar for the week is Friday's personal consumption expenditures (PCE) price index report- the Federal Reserve's preferred measure of inflation, expected to show a moderation in price pressures.

Market participants are still expecting about two rate cuts this year, pricing in a 61% chance of a 25-basis-point cut in September, as per LSEG's FedWatch.

The data comes against the backdrop of investors weighing the moderation in recent inflation data against the Fed's latest projection of one rate cut likely in December.

Investors also awaited remarks from Fed voting committee member and San Francisco President Mary Daly during the day, in light of the narrative of higher-for-longer interest rates maintained by several Fed policymakers.

Other events lined up for the week include durable goods, weekly jobless claims and final first-quarter GDP figures, the annual Russell index reconstitution, and some quarterly earnings.

Further, President Joe Biden will debate rival Donald Trump in Atlanta on Thursday, with both neck-and-neck in national opinion polls.

At 11:53 a.m. ET, the Dow Jones Industrial Average was up 345.49 points, or 0.88%, at 39,495.82, the S&P 500 was up 15.86 points, or 0.29%, at 5,480.48, and the Nasdaq Composite was down 45.18 points, or 0.26%, at 17,644.18.

Meta Platforms rose 2% after a report that the Facebook parent has discussed integrating its generative AI model into Apple's recently announced AI system for iPhones. Apple's shares also climbed 2.2%.

RXO leapt 23.3% on plans to buy United Parcel Service's Coyote Logistics business unit for $1.025 billion.

Advancing issues outnumbered decliners by a 2.91-to-1 ratio on the NYSE and by a 1.59-to-1 ratio on the Nasdaq.

The S&P index recorded 31 new 52-week highs and one new low, while the Nasdaq recorded 34 new highs and 78 new lows. (Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru; Editing by Maju Samuel)