US STOCKS-Wall St flat as Libya turmoil continues, oil eases

* Oil eases on talk of a production hike

* McDonald's falls after February sales

* Indexes: Dow flat, S&P down 0.1 pct, Nasdaq down 0.3 pct

* For up-to-the-minute market news see [STXNEWS/US]

By Chuck Mikolajczak

NEW YORK, March 8 (Reuters) - U.S. stocks were flat on Tuesday as continued turmoil in Libya indicated a quick resolution to the unrest in that country was not on the horizon and a drop in oil prices failed to ease investor worry about the economic recovery.

Libyan warplanes struck at rebel forces behind the war's eastern front lines on Tuesday, stepping up the government offensive to roll back early gains in the insurrection against Muammar Gaddafi. [ID:nLDE72701U]

Brent crude dipped 1.5 percent to $113.30 a barrel after Kuwait's oil minister said OPEC was in discussions to increase production for the first time in two years. U.S. oil futures shed 0.4 percent to $105.01. For details, see [ID:nL3E7E80CC] and [ID:nTOPMEAST].

"We are at the low end of this very short-term trading range that we've been in since this Middle East crisis began, and the market is factoring in perhaps a longer-term impact or longer duration of these events," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

"Perhaps oil prices will trend upward for the duration of the events."

The Nasdaq composite index dropped 1.4 percent on Monday and closed just above its 50-day moving average. If the index falls below that widely followed technical gauge, that could signal more declines in the technology sector, which had helped lead a market rally.

The S&P 500 lost momentum as it closed on Monday below a trend line it had been holding for more than six months, which connects the low in late August with one in late November.

Equities have been closely tied to oil prices recently, as investors worried that consumer spending may be curtailed by higher oil and gas prices, choking off an economic recovery.

The Dow Jones industrial average <.DJI> was up 0.53 points, or 0.00 percent, at 12,090.56. The Standard & Poor's 500 Index <.SPX> was down 0.78 points, or 0.06 percent, at 1,309.35. The Nasdaq Composite Index <.IXIC> was down 7.20 points, or 0.26 percent, at 2,738.43.

McDonald's Corp slipped 0.8 percent to $75.70 after the fast-food restaurant chain said global sales at established restaurants in February rose 3.9 percent, but U.S. sales were weaker than other regions. [ID:nN08173003]

(Additional reporting by Rodrigo Campos; Editing by Padraic Cassidy)