US STOCKS-Market falls on worries about the economy

(Updates to midmorning)

By Kristina Cooke

NEW YORK, Feb 15 (Reuters) - U.S. stocks slipped on Friday after a profit warning from electronics retailer Best Buy (BBY.N: Quote, Profile, Research) and a drop in a gauge of consumer sentiment added to worries about the economic outlook.

Best Buy's warning dragged on other retailers' shares. Circuit City (CC.N: Quote, Profile, Research) fell 3.2 percent to $4.88. An index of retail stocks .RLX was down 1.1 percent.

Preliminary February consumer sentiment data came in weaker-than-expected. For details, see [ID:nN15558734]. Data showing a softness in manufacturing in New York State added to the negative tone, along with persistent worries about the stability of struggling bond insurers.

Shares of companies perceived as economic bellwethers, such as Caterpillar Inc (CAT.N: Quote, Profile, Research) and United Technology (UTX.N: Quote, Profile, Research) were among the top drags on the Dow.

But losses were limited by a rise in Kraft Foods Inc (KFT.N: Quote, Profile, Research) after billionaire Warren Buffett said he had taken a stake in the company, while pharmaceutical stocks gained after Goldman Sachs raised its recommendation on the sector.

The consumer sentiment data "was a surprise to the downside, but I don't think the markets are getting hit as badly as anticipated, given all the negative news that's out," Tom Schrader, managing director for U.S. Equity trading at Stifel Nicolaus Capital Markets in Baltimore.

The Dow Jones industrial average .DJI was down 41.86 points, or 0.34 percent, at 12,335.12. The Standard & Poor's 500 Index .SPX was down 3.07 points, or 0.23 percent, at 1,345.79. The Nasdaq Composite Index .IXIC was down 10.51 points, or 0.45 percent, at 2,322.03.