US STOCKS-Market cuts gains on bond insurer, economy woes

(Updates to show stocks losing gains)

NEW YORK, Feb 1 (Reuters) - U.S. stocks sharply cut gains on Friday, sending the Dow and Nasdaq briefly into negative territory, as investors fretted about the outlook for bond insurers and the economy, overshadowing takeover news in the tech sector.

The Dow Jones industrial average .DJI was up 11.22 points, or 0.09 percent, at 12,661.58. The Standard & Poor's 500 Index .SPX was up 3.85 points, or 0.28 percent, at 1,382.40. The Nasdaq Composite Index .IXIC was up 0.88 points, or 0.04 percent, at 2,390.74. (Reporting by Caroline Valetkevitch; Editing by James Dalgleish)