* Consumer confidence unexpectedly drops in June
* Falling crude prices sink energy shares
* Dow off 1.3 pct; S&P down 1.2 pct; Nasdaq off 0.8 pct (Updates to midday, changes byline)
By Rodrigo Campos
NEW YORK, June 30 (Reuters) - U.S. stocks fell on Tuesday after a surprising drop in consumer confidence sparked investor concern about spending and the strength of the economic recovery, even as the S&P 500 was set to close its first positive quarter in almost two years.
The Conference Board's measure of consumer confidence slid in June and hurt expectations for a recovery, as consumer spending accounts for roughly two-thirds of the U.S. economy.
The S&P energy index fell 1.5 percent as risk aversion resurfaced after the confidence data and helped lift the U.S. dollar. As a result, commodity prices fell.
"The market may have been getting a bit ahead of events in the last few days," said David Resler, chief economist at Nomura Securities International in New York.
"This is a wake-up call for the stock market that the economic recoveries typically move in fits and starts, and this kind of (move) in consumer confidence is a revelation that it is not all clear sailing from here."
Crude oil futures fell more than $2 per barrel and hit shares of companies in the sector. Services provider Schlumberger Limited fell 1.6 percent to $54.11, while Occidental Petroleum Corp lost 1.6 percent to $65.11.
The Dow Jones industrial average lost 109.28 points, or 1.28 percent, to 8,420.10. The Standard & Poor's 500 Index dropped 11.23 points, or 1.21 percent, to 916.00. The Nasdaq Composite Index fell 14.54 points, or 0.79 percent, to 1,829.52.
Despite today's decline so far, the broad S&P 500 is on track to wrap up its best quarter in at least six years.
On this last day of the second quarter, money managers are expected to burnish their portfolios by selling losing stocks and scooping up winners in a move that may add to volatility.
Analysts noted that a shortened trading week could also lead to increased volatility, as well as thinner volumes. U.S. markets will be shut for the U.S. Independence Day holiday on Friday.
In other economic news, separate reports showed U.S. single-family home prices fell in April but the pace of decline moderated, and business activity in the Midwest contracted again in June, but at a less severe rate than expected. (Reporting by Rodrigo Campos; Editing by Jan Paschal)