Dow and Nasdaq slip on consumer spending worry

By Jennifer Coogan

NEW YORK (Reuters) - The Dow and Nasdaq slipped on Friday on concerns about consumer spending after an index of consumer sentiment fell to a 16-year low and retailer Best Buy (BBY.N: Quote, Profile, Research, Stock Buzz) warned that shopper traffic dropped off after the holidays.

The S&P 500, however, managed a small gain thanks largely to a rally in food stocks on news that Warren Buffett's Berkshire Hathaway had taken a stake in Kraft Foods (KFT.N: Quote, Profile, Research, Stock Buzz) , and as Campbell Soup (CPB.N: Quote, Profile, Research, Stock Buzz) and H.J. Heinz (HNZ.N: Quote, Profile, Research, Stock Buzz) gave reassuring profit outlooks for the year. All three companies gained more than 5 percent.

Best Buy, the No. 1 electronics retailer, dragged down other retail stocks on Friday with its assessment of slack post-holiday demand. Best Buy shares dropped 2.5 percent, while rivals Circuit City (CC.N: Quote, Profile, Research, Stock Buzz) and RadioShack also fell.

Following on the heels of the Best Buy warning, a Reuters/University of Michigan index of consumer sentiment sent a shiver through the market as it dropped in February to a level associated with past recessions. Other data showing softness in manufacturing in New York state and worries about the stability of bond insurers added to the gloomy mood.

"The sentiment data is not encouraging," said Michael Metz, chief investment strategist at Oppenheimer & Co in New York. "It's amazing the market has held up as well as it has in the face of this bad news, but unfortunately it's still the tip of the iceberg. I think we have much more to go as the year progresses in terms of problems."

The Dow Jones industrial average .DJI was down 28.77 points, or 0.23 percent, at 12,348.21. The Standard & Poor's 500 Index .SPX was up 1.13 points, or 0.08 percent, at 1,349.99. The Nasdaq Composite Index .IXIC was down 10.74 points, or 0.46 percent, at 2,321.80.

For the week, the S&P 500 and the Dow both added 1.4 percent. The Nasdaq climbed 0.7 percent.

The major indexes bounced off session lows late in the trading day as monthly options expiration triggered automated trades.