Wall Street down on euro zone worries, technicals

NEW YORK (Reuters) - Stocks fell on Friday as the euro zone's debt problems revived worries about the broader impact and the S&P 500 was below a key technical level.

Shares in clothing retailer Gap Inc fell 16 percent to $19.60 after it slashed its full-year profit outlook late on Thursday, saying higher price tags will not be enough to offset rising cotton costs.

But Barnes & Noble Inc shares rose 29.3 percent at $18.24 after John Malone's Liberty Media Corp proposed buying the company for $1.02 billion. The largest U.S. bookstore chain put itself up for sale nine months ago.

U.S. stocks ended higher on Thursday but the S&P 500 ran into resistance after its recent bounce, and many investors expect a patch of economic weakness over the summer. The 1,340 level on the S&P has met with repeated bouts of selling.

"In the near-term, the weakness below 1,340 is definitely pressuring the market to the downside more," said Kurt Brunner, portfolio manager of Swarthmore Group in Philadelphia.

The Dow Jones industrial average <.DJI> was down 72.35 points, or 0.57 percent, at 12,532.97. The Standard & Poor's 500 Index <.SPX> was down 7.85 points, or 0.58 percent, at 1,335.75. The Nasdaq Composite Index <.IXIC> was down 13.72 points, or 0.49 percent, at 2,809.59.

Market sentiment remained fragile due to the debate about possible solutions to Greece's debt problems, with the main market worry that any restructuring could have contagion effects beyond Greece's borders. The euro dropped to fresh session lows against the dollar on Friday.

(Reporting by Angela Moon, Editing by Kenneth Barry)