* July consumer spending picks up slightly
* Major U.S. indexes set to end the week higher
* Freeport-McMoRan rises after Icahn discloses stake
* Indexes off: Dow 0.41 pct, S&P 0.27 pct, Nasdaq 0.20 pct (Adds details, updates prices)
By Tanya Agrawal
Aug 28 (Reuters) - U.S. stocks slipped on Friday after comments from an influential member of the U.S. Federal Reserve appeared to suggest an interest rate hike next month remained a possibility.
Fed Vice Chairman Stanley Fischer said the United States was heading in the direction of higher rates and that recent economic data had been impressive.
While Fischer said he had made no decision on a September rate hike, he added that the Fed could not wait for the case to be overwhelming to increase rates and that the recent market volatility could settle quickly.
Stocks were mixed before Fischer's comments on CNBC, with investors wary of taking big positions into the weekend after days of tumultuous trading.
Even so, the three major U.S. indexes looked set to end the week higher after a brutal selloff early in the week sparked by worries about the health of the Chinese economy.
"A lot of investors are rebalancing their portfolios before going into the weekend and the dips that we saw earlier in the week were good buy opportunities," said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin.
The recent market turmoil, that saw the Dow lose more than 1,000 points in intraday trading on Monday, has led to strategists cutting their end-of-year forecasts for indexes. Data for August 20-26 showed a record $28 billion in outflows from equity funds.
Strong gains over the last two days suggested that the worst might be over, but the CBOE Volatility index indicated that the market was still more volatile than usual.
The index - popularly known as the "fear index" - was up 2 percent at 26.67. It soared to a more than 6-year-high earlier in the week.
"The VIX average for the year has been about 15 and I definitely expect it to be above 20 in the short-term," said Frederick.
In China, stocks jumped more than 4 percent for the second day as authorities announced that pension funds managed by local governments will start investing 2 trillion yuan ($313 billion) as soon as possible in stocks and other assets.
At 12:03 ET (1603 GMT) the Dow Jones industrial average was down 69.02 points, or 0.41 percent, at 16,585.75, the S&P 500 was down 5.44 points, or 0.27 percent, at 1,982.22 and the Nasdaq Composite was down 9.55 points, or 0.2 percent, at 4,803.16.
Six of the 10 major sectors were lower, with the utilities index's 0.8 percent fall leading the decliners. The energy index jumped 2 percent a day after oil prices jumped the most in a day since 2009.
Data released on Friday showed U.S. consumer spending picked up a bit in July as households bought more automobiles, offering further evidence of strength in the economy.
Freeport-McMoRan shares were up 2 percent to $10.40 after activist investor Carl Icahn disclosed an 8.5 percent stake in the company.
Autodesk was down 4.9 percent at $47.54 after the maker of computer-aided design software cut its full-year profit and revenue forecast for the second time this year.
Big Lots was jumped 14.9 percent to $48.25 after its second-quarter profit beat expectations and the company raised its full-year adjusted profit forecast.
Advancing issues outnumbered decliners on the NYSE by 1,637 to 1,323. On the Nasdaq, 1,565 issues rose and 1,131 fell.
The S&P 500 index showed one new 52-week high and no new lows, while the Nasdaq recorded 14 new highs and 13 new lows. (Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)