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) 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) , and as Campbell Soup (CPB.N) and H.J. Heinz (HNZ.N) 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) 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.
"It appears that people were buying or selling their expiring February index options and had to repurchase the S&P futures or its underlying stocks against their hedge," said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim in Chicago. "That pared the losses in the S&P 500 cash and futures at the end of the day."
Manufacturers and other economically sensitive shares ended lower. Diversified manufacturer Honeywell International (HON.N) was the biggest drag on the Dow, losing 2.6 percent to $56.04. United Technology (UTX.N), whose products range from Otis elevators to Black Hawk military helicopters, was the next-biggest loser, down 1.5 percent to $71.53.
Best Buy's stock fell 2.5 percent to $44.62. Circuit City shares were down 5 percent to $4.79. RadioShack shares fell 1.8 percent to $15.42. .
In the latest development affecting bond insurers, FGIC Corp, whose main unit has lost its top credit ratings from all three agencies, told regulators it wants to be split into two companies, New York Insurance Superintendent Eric Dinallo said.
Shares of other bond insurers lost ground. MBIA Inc (MBI.N) fell 3 percent to $12.24, while Ambac Financial (ABK.N) fell 2.9 percent to $10.22
Berkshire Hathaway Inc (BRKa.N)(BRKb.N), the holding company controlled by billionaire investor Buffett, said it has taken an 8.6 percent stake in Kraft, whose shares rose 6.9 percent to $31.33.
Campbell's shares rose 6.1 percent. Heinz shares jumped 5.2 percent to $45.12. It was the best day for the S&P packaged foods index (.GSPFOOD) since July 2002, rising 3.7 percent.
Trading was moderate on the New York Stock Exchange, with about 1.5 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.1 billion shares traded, just below last year's daily average of 2.17 billion.
U.S. financial markets will be closed on Monday for the Presidents Day holiday, and the bond market is expected to close early on Friday.
(Additional reporting by Doris Frankel; Editing by Leslie Adler)