* Traders add to Fed rate cut bets as inflation eases

* Nike slumps after results

* Infinera jumps after Nokia to buy company

(Updates to 4 p.m. ET)

June 28 (Reuters) -

U.S. stocks ended weaker on Friday after an early rally fizzled as investors digested in-line inflation data and weighed political uncertainty after the U.S. presidential debate, while Nike had steepest one-day fall in over two decades after a gloomy forecast.

"I don't think the inflation number changes much because the Federal Reserve has been pretty serious about their 2% target and remains disciplined," said Ann Miletti, Allspring's head of active equity.

Data showed U.S.

monthly inflation

was unchanged in May, an

encouraging development

after strong price increases earlier this year raised doubts over the effectiveness of the Fed's monetary policy.

The Commerce Department report also showed consumer spending rose marginally last month, fueling optimism that the U.S. central bank could engineer a much-desired "soft landing" for the economy.

Bets on a rate cut in September rose to 66% after the personal consumption expenditures price index release, LSEG FedWatch data showed.

Traders have maintained bets on two cuts despite Fed projections of just one this year, as they hope inflation will keep cooling.

The first debate on Thursday between U.S. President Joe Biden and Republican rival Donald Trump also weighed on stocks, said Thomas Martin, senior portfolio manager at Globalt Investments, citing the incumbent's shaky performance.

"People are trying to think about what's going to happen with the presidential election. So instead of uncertainty decreasing after the debate, it's increased," he said.

Treasury yields reversed early losses to end

higher

, adding pressure on some megacap stocks.

San Francisco Fed President

Mary Daly

acknowledged the cooling inflation, and noted that it is "good news that policy is working." Fed Governor Michelle Bowman said the central bank would follow its own path as its inflation goal has yet to be reached.

The S&P 500 energy index posted gains, while utilities fell.

Nike slumped after forecasting a surprise drop in fiscal 2025 revenue, weighing on the broader consumer discretionary sector.

According to preliminary data, the S&P 500 lost 23.71 points, or 0.43%, to end at 5,460.70 points, while the Nasdaq Composite lost 130.01 points, or 0.73%, to 17,728.68. The Dow Jones Industrial Average fell 54.11 points, or 0.14%, to 39,109.95.

The FTSE Russell finalized the

reconstitution

of its indexes at the end of the session.

The S&P 500 and the Nasdaq indexes were set for quarterly gains, but the Dow was on track to drop, highlighting the divergence between the more tech-heavy indexes and the rest of the market.

Among individual stocks, optical networking gear maker Infinera jumped after Nokia said it would acquire the company in a $2.3 billion deal.

(Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru; Editing by Maju Samuel and Richard Chang)