US STOCKS-Wall St slips on euro zone but US data helps

* Europe woes vie with better US data

* Consumer confidence, Midwest manufacturing lend support

* Volatility index gains on short-term uncertainty

* Dow down 0.3 pct, S&P off 0.5 pct, Nasdaq off 1.1 pct * For up-to-the-minute market news see [STXNEWS/US] (Updates to late afternoon, changes byline)

By Edward Krudy

NEW YORK, Nov 30 (Reuters) - Europe's debt crisis kept Wall Street under pressure for a third straight session on Tuesday but stocks were off their lows as investors took heart from stronger-than-expected economic data.

The euro zone's troubles showed no signs of abating. Investors pushed the single currency lower and spreads on bonds of peripheral member states to new highs amid concerns they may ultimately be forced to default. For details, see [ID:nLDE6AT0Z0]

But in a rerun of the previous session, the S&P 500 erased much of its losses after falling more than 1 percent, with investors caught in a tug of war between Europe's woes and signs of a more robust U.S. economy.

"There is no doubt, I think, that absent the troubles in Europe ... we continue to get very supportive data in the U.S.," said Bill Stone, chief investment strategist at PNC Wealth Management in Philadelphia

Consumer discretionary stocks gained after U.S. consumer confidence rose to its highest level in five months. Retailer Gap Inc rose 3.5 percent to $21.44, while Tiffany & Co added 2.8 percent to $62.31.

The improved consumer sentiment as well as a report showing U.S. Midwest business activity grew faster than expected are the latest in a series of reports that have made investors more optimistic before Friday's November unemployment report. [ID:nN30263756]

The Dow Jones industrial average <.DJI> dropped 28.68 points, or 0.26 percent, to 11,023.81. The Standard & Poor's 500 Index <.SPX> fell 5.60 points, or 0.47 percent, to 1,182.16. The Nasdaq Composite Index <.IXIC> lost 26.52 points, or 1.05 percent, to 2,498.70.

Global investors increased their exposure to equities in November despite weaknesses on many bourses, while U.S. and British fund managers stepped away from crisis-hit euro-zone bonds, a Reuters asset allocation poll found.

For details on Reuters' latest asset allocation poll, see [ID:nN29202856] [ID:nLDE6AT0HU] and [ID:nLDE69R0FD]

However, reflecting investors' fear over short-term uncertainty, the CBOE Volatility Index, or VIX <.VIX>, rose 7.3 percent to 23.10.

Amid the economic reports, the S&P/Case-Shiller home prices data was a fly in the ointment. Monthly prices fell more than expected in September and prices from a year earlier rose more slowly than forecast. [ID:nNLLTME6O7]

But in a sign that investors may have grown too bearish on the sector, the Dow Jones U.S. home construction index <.DJUSHB> edged up 1.4 percent after closing Monday at its lowest since July 2009. The index is down 12.8 percent this year.

Google Inc weighed on the Nasdaq index following media reports that the company is close to a deal to buy local advertising website Groupon Inc in what could be the Internet company's biggest acquisition to date. [ID:nN30246836]

Google shares fell 3.9 percent to $559.54.

In other deal news, Swiss engineering group ABB is to buy U.S. industrial motors manufacturer Baldor Electric Co for $3.1 billion to capitalize on a global push for energy efficiency and boost its North American presence. Baldor's stock soared 40.2 percent to $63.26 and topped the list of percentage gainers on the New York Stock Exchange. [ID:nLDE6AT02K]

(Reporting by Edward Krudy; Editing by Kenneth Barry)