(Repeats to fix typo in 4th paragraph)
* Supervalu slips after downgrade
* Borders slides a day after two top execs resign
* Dow flat, S&P off 0.1 pct, Nasdaq up 0.1 pct
* For up-to-the-minute market news see [STXNEWS/US] (Updates to early trading)
By Rodrigo Campos
NEW YORK, Jan 4 (Reuters) - U.S. stock indexes were little changed on Tuesday as optimism over the economic outlook was offset by a decline in consumer stocks.
Tuesday's small move follows a jump in U.S. stock indexes Monday as manufacturing data around the world prompted investors to inject new money into equities.
"You are continuing to see positive news as far as the economy goes, which has continued to fuel this rally as we enter the new year," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
"Most of the year-end prognostications for the market for 2011 were calling for a fairly strong year, so I think that may be getting the retail investor a little bit more interested," he said.
The Dow Jones industrial average <.DJI> dropped 0.68 points, or 0.01 percent, to 11,670.07. The Standard & Poor's 500 <.SPX> dropped 1.55 points, or 0.12 percent, to 1,270.32. The Nasdaq Composite <.IXIC> gained 1.56 points, or 0.06 percent, to 2,693.08.
Monday's rally that had the Dow and S&P reaching new two-year highs was accompanied by a rise in volume, with more than 7.7 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, above the 50-day moving average. The volume increase may indicate the gains could extend into Tuesday.
But Morgan Stanley dampened optimism as it forecast a base case year-end target for the S&P 500 at 1,238, below the close for 2010. The firm's risk-reward scenario for 2011 was "skewed to the negative."
Weighing on consumer stocks, Supervalu Inc
The S&P consumer staples index <.GSPS> fell 0.5 percent.
Defense sector stocks are also on the spotlight, with U.S. Defense Secretary Robert Gates expected to detail about $100 billion in Pentagon savings and cuts to weapons programs as early as Thursday. The PHLX defense index <.DFX> dipped 0.3 percent after hitting a seven-month high on Monday. [ID:nN03185583]
Investors will look into Federal Open Market Committee minutes from the Dec. 14 meeting for clues on the U.S. central bank's outlook on the economy. The minutes are due at 2 p.m. EST (1900 GMT). (Reporting by Rodrigo Campos; editing by Jeffrey Benkoe)