Wall Street indexes mixed in volatile trade; Nasdaq down 1 percent

NEW YORK (Reuters) - The Nasdaq dropped more than 1 percent on Friday, continuing a recent bout of weakness as the tech-heavy index was pressured by weakness in semiconductor stocks.

The S&P 500 posted a modest decline, with a retreat in technology and energy shares somewhat offset by strength in consumer staples, while the Dow posted a modest gain.

All three indexes remained on track for a sharp drop on the week, which would also be their third straight weekly loss.

The downturn has come on growing concerns over the pace of economic growth and the impact that could have on corporate earnings.

Trading was volatile, with major indexes fluctuating between gains and losses in the wake of a massive selloff in Thursday's session. The CBOE Volatility index <.VIX> rose 2.5 percent to 19.23 and earlier rose to its highest level since December 2012.

"In a vacuum of policy response" to the weakness in Europe, "investors are selling first and asking questions later," said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Asset Management.

With the day's decline, the S&P 500 is down 4.3 percent from a record close hit last month.

"The magnitude of the move has been disproportionate to the change in the fundamentals," said McDonald, who helps oversee $924 billion in assets. He added that European weakness "is further evidence that focusing on U.S. assets makes sense."

The Philadelphia SE Semiconductor index <.SOX> fell 6 percent as Microchip Technology Inc warned on sales, saying an industry correction had begun and more bad news could be on the way from other chipmakers.

Microchip shares fell 13 percent to $39.49 while Intel Corp was off 4.7 percent at $32.05. Texas Instruments lost 7.4 percent to $42.61.

At 11:13 a.m. EDT, the Dow Jones industrial average <.DJI> rose 7.19 points, or 0.04 percent, to 16,666.44, the S&P 500 <.SPX> lost 6.79 points, or 0.35 percent, to 1,921.42 and the Nasdaq Composite <.IXIC> dropped 53.88 points, or 1.23 percent, to 4,324.46.

The Dow was lifted by strength in Coca-Cola Co , which was up 1.8 percent at $44.64, and Wal-Mart Stores Inc , which rose 1.4 percent to $78.94.

Declining issues outnumbered advancing ones on the NYSE by 2,149 to 810, for a 2.65-to-1 ratio; on the Nasdaq, 1,693 issues fell and 859 advanced for a 1.97-to-1 ratio favoring decliners.

The benchmark S&P 500 index was posted 3 new 52-week highs and 40 new lows; the Nasdaq Composite was recorded 9 new highs and 264 new lows.

(Editing by Bernadette Baum)

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