* Citigroup shares slump after Fed rejects capital plan
* GDP grew 2.6 pct in Q4; jobless claims unexpectedly drop
* Dow off 0.02 pct; S&P 500 down 0.2 pct; Nasdaq off 0.5 pct (Updates to midday, changes byline)
By Chuck Mikolajczak
NEW YORK, March 27 U.S. stocks slipped on Thursday as some positive economic data failed to counter lingering geopolitical concerns, although losses were limited as the end of the quarter approached.
The U.S. economy grew a bit faster than previously estimated in the fourth quarter and new claims for jobless aid dropped to a near four-month low last week, but contracts to buy previously owned homes fell in February to their lowest level since October 2011.
"Data has largely been in line. It's been incredibly uneven, and that is another reason why there is some hesitancy," said Peter Kenny, chief executive officer of Clearpool Group in New York.
Markets were also pressured by a steep drop in Citigroup Inc shares, which suffered their biggest daily decline since November 2012 after the Federal Reserve rejected the bank's capital plan. The S&P financial index lost 0.9 percent and was the worst-performing sector.
The benchmark S&P 500 Index managed to hold above the 1,840 level, which has acted as support recently, as the end of the quarter approached and money managers engaged in "window dressing," adjusting positions to improve the look of their portfolios.
"The market has been given plenty of reasons to sharply sell off and it does not seem as though there is that spirit to do it. Clearly we are coming to the end of the quarter and no one is particularly interested in marking the book down," Kenny said.
The United States and the European Union on Wednesday agreed to prepare possibly tougher economic sanctions in response to Russia's annexation of Ukraine's Crimea territory.
While Western leaders had said earlier that they would hold off on new sanctions unless Moscow takes further destabilizing actions in the region - which Russian President Vladimir Putin last week said he wasn't interested in doing - investors are concerned about the potential fallout of a prolonged conflict.
Concerns about the effect of sanctions on Russia's energy sector and global supplies helped push crude oil prices and the S&P energy index higher. In addition, Exxon Mobil Corp gained 1.1 percent to $95.71 after Bank of America Merrill Lynch boosted its rating on the stock to "buy."
Citigroup tumbled 5.8 percent to $47.25 a day after the Fed rejected the bank's plan to buy back $6.4 billion of shares and boost dividends, saying it wasn't sufficiently prepared to handle a potential financial crisis. A source close to the matter told Reuters that Citi officials had not expected the rejection.
The Fed also rejected Zions Bancorp's plan late on Wednesday. Shares of Zions Bancorp slid 1.2 percent to $29.84 by midday on Thursday.
The Dow Jones industrial average fell 3.70 points or 0.02 percent, to 16,265.29. The S&P 500 lost 3.92 points or 0.21 percent, to stand at 1,848.64. The Nasdaq Composite dropped 20.923 points or 0.5 percent, to 4,152.655.
Equities have been volatile this week, moving on any sign of easing or rising tensions in the biggest conflict between Russia and the United States since the Cold War. While data has supported the market, investors used the uncertainty over Ukraine to take profits in some of the market's biggest outperformers, especially in the technology and biotech sectors.
TriNet Group Inc jumped 18.9 percent to $19.02 in its trading debut a day after it went public at $16 per share. The initial public offering valued the cloud-based payroll processer at about $1.09 billion. (Editing by Jan Paschal)