* Amazon falls after quarterly profit plunges
* Starbucks, Mattel lower after posting results
* Tobacco stocks fall after FDA statement on nicotine
* Q2 GDP up 2.6 pct vs 1.2 pct rise in Q1
* Indexes down: Dow 0.01 pct, S&P 0.23 pct, Nasdaq 0.08 pct (Updates to early afternoon)
By Tanya Agrawal
July 28 (Reuters) - The Dow and the Nasdaq clawed back losses on Friday as technology stocks edged higher, but the S&P was hobbled by a drop in the shares of Amazon and tobacco companies.
Amazon’s shares fell 2.32 percent after it reported a 77 percent drop in profit as its rapid and costly expansion into new shopping categories and countries showed no sign of slowing.
The stock was the worst performer on the Nasdaq and the second biggest drag on the S&P 500.
The tech index pared losses to trade up 0.08 percent. The sector has been the best performer this year, driving the S&P 500’s 10.6 percent run in 2017.
“Investors are still feeling some weakness in the tech sector and that’s weighing on the broader market,” said Robert Pavlik, chief market strategist at Boston Private Wealth.
“I’m a bit concerned about some of the valuations, but I expect to see these stocks eventually climb higher as people look for growth. There are bound to be some bumps along the way.”
The consumer staples sector’s 1.17 percent fall led a broad decline as an FDA announcement seeking to cut nicotine in cigarettes to non-addictive levels dragged down tobacco stocks.
Altria Group tumbled on the news, dropping as much as 19 percent to its lowest intraday level in 15 months. The stock was the biggest drag on the S&P.
U.S.-traded shares of British American Tobacco plunged 10 percent, while Philip Morris fell 1.12 percent.
The consumer discretionary sector, of which Amazon is a component, was down 0.77 percent also due to losses in Starbucks and Mattel.
Starbucks fell 8.81 percent and Mattel 8.70 percent after their disappointing quarterly reports.
At 12:43 p.m. ET (1643 GMT), the Dow Jones Industrial Average was down 1.24 points, or 0.01 percent, at 21,795.31; the S&P 500 was down 5.76 points, or 0.23 percent, at 2,469.66 and the Nasdaq Composite was down 5.12 points, or 0.08 percent, at 6,377.07.
Risk sentiment also took a hit following the failure of Republicans to repeal Obamacare in a tight Senate vote overnight.
Investors are worried about the ability of President Donald Trump to legislate his pro-growth agenda of tax reform and higher spending on infrastructure.
“When a lot of people think about the White House, they just think of a lot of chaos going on, and if they can’t get stuff together in their own house, how are they going to get it together for the country. What kind of outlook does that have for things like tax reform?,” Pavlik said.
Data showed that the U.S. economy accelerated in the second quarter as consumers ramped up spending and businesses invested more on equipment.
Gross domestic product increased at a 2.6 percent annual rate in the April-June period, up from 1.2 percent in the first quarter, the Commerce Department said in its advance estimate.
Declining issues outnumbered advancers on the NYSE by 1,503 to 1,272. On the Nasdaq, 1,612 issues fell and 1,137 advanced. (Reporting by Tanya Agrawal in Bengaluru; Editing by Anil D’Silva)