US STOCKS-Dow drops on economic worry; Nasdaq, S&P 500 edge up

(Updates to midday, changes byline)

By Ellis Mnyandu

NEW YORK, March 25 (Reuters) - The Dow slipped on Tuesday as a report showing U.S. consumer confidence sank to a five-year low in March fueled uneasiness about the economy and the impact of the housing slump on profits.

But the Nasdaq and the S&P 500 were slightly higher as positive broker comments on shares of chip maker Qualcomm Inc (QCOM.O: Quote, Profile, Research) and a raised profit outlook from Monsanto Co (MON.N: Quote, Profile, Research) tempered worries about the economy.

Data showing a slide in home prices signaled further deterioration in the feeble housing market and dampened the optimism that helped Wall Street achieve its best two-day advance in nearly four months on Monday.

Shares of financial services companies were among the top drags following an earnings downgrade of Merrill Lynch (MER.N: Quote, Profile, Research) and a rating cut on Bank of America Corp (BAC.N: Quote, Profile, Research) over exposure to the bursting of the housing bubble.

Merrill Lynch shares dropped 0.5 percent, while those of Bank of America, the No. 2 U.S. bank by assets, slid 3.4 percent.

Shares of retailers also took a beating following the glum news about consumer confidence. Shares of Home Depot Inc (HD.N: Quote, Profile, Research), the No. 1 U.S. home improvement chain, were among the Dow's top drags, down 2.3 percent.

"After four days of gains, the market was poised for some sort of a pullback anyway," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co., in San Francisco.