* Indexes off: Dow 0.26 pct, S&P 0.45 pct, Nasdaq 0.59 pct (Adds comments, updates to late morning trading)
By Chuck Mikolajczak
NEW YORK (Frankfurt: HX6.F - news) , May 9 (Reuters) - U.S. stocks dipped on Friday, putting the S&P 500 on track to close a week of choppy trading on a negative note, while the Nasdaq was on pace for its worst weekly decline in four.
Apple Inc was the biggest drag on both the benchmark S&P index and the Nasdaq 100 on news it is close to paying a record $3.2 billion for Beats Electronics, two people with knowledge of the matter said, an expensive foray into music streaming and headphone gear.
Some analysts questioned whether Beats, valued at $1 billion during its last funding round in September, was worth that price. Apple shares lost 1.2 percent to $581.
"What we look for in really good companies is people that understand the cash they have is the shareholders' and they use it accordingly," said Kim Forrest, senior equity research analyst, Fort Pitt Capital Group in Pittsburgh.
"I don't care about the $3 billion leaving Apple; what I care about is the valuation they are putting on this little company, that is what is troubling."
The S&P 500 has alternated between gains and losses each day this week, and the Nasdaq has dropped for three straight sessions - its longest losing streak since early April - as Internet-related stocks came under pressure. The Nasdaq is on pace for its first four-day losing streak since mid-March.
Both the Dow and S&P 500 have struggled to break through recent highs, with market participants citing weakness in growth names on the Nasdaq issues and among smaller capitalized issues as a headwind. The Russell 2000 of small-cap companies touched correction territory with a 10 percent drop since its March 9 high before bouncing slightly. A drop of that magnitude on a closing basis could spark more investor caution.
"It's the job of investors to participate in the market and reflect what is going on, and if they think these things are overpriced, there is information in this. We are trying to figure out what it really means - is it a temporary lull, some pricing issues - but there is something confusing going on here," said Forrest.
The Dow Jones industrial average fell 42.25 points, or 0.26 percent, to 16,508.72, the S&P 500 lost 8.41 points, or 0.45 percent, to 1,867.22 and the Nasdaq Composite dropped 24.094 points, or 0.59 percent, to 4,027.402.
A proposed $35 billion merger of U.S.-based Omnicom Group Inc and rival France's Publicis Groupe SA (Other OTC: PGPEF - news) to create the world's biggest ad agency has been called off due to complex obstacles. Omnicom shares lost 0.6 percent to $65.78.
Gap Inc reported a 9 percent increase in comparable sales for April and the apparel company gave a profit forecast that surpassed Wall Street expectations. Shares were up 4 percent at $40.80.
Rocket Fuel Inc, tumbled 26.6 percent to $20.42 after the technology provider for Web-based video advertising forecast current-quarter revenue far below expectations, prompting downgrades from Goldman Sachs (NYSE: GS-PB - news) and BMO Capital.
Ralph Lauren Corp lost 3.8 percent to $146.26 after the luxury clothing house said it expected global revenues to rise between 6 percent and 8 percent in fiscal 2015 but warned its operating margin would decline.
Of 451 companies in the S&P 500 that have reported earnings through Friday morning, 69 percent beat expectations, above the 63 percent average since 1994 and the 66 percent beat rate for the past four quarters, according to Thomson Reuters (Frankfurt: TOC.F - news) data.
Profits are expected to rise 5.4 percent this quarter, down from 6.5 percent estimated at the start of the year, but above the low of 0.6 percent in mid-April. (Reporting by Chuck Mikolajczak; Editing by Bernadette Baum and Nick Zieminski)