* S&P 500 slips but well off lows as investors buy on the dip
* P&G shares jump after CEO replacement
* Investors anxious about Fed's possible stimulus exit
* Dow up 0.1 pct; S&P 500 down 0.1 pct; Nasdaq flat
By Angela Moon
NEW YORK, May 24 (Reuters) - The S&P 500 declined for a third day on Friday, with the three major U.S. stock indexes posting their first negative week since mid-April on lingering concern that the U.S. central bank may scale back its stimulus measures to support the economy.
Still, the indexes closed well off their lows in light volume ahead of the three-day Memorial Day holiday weekend.
The Dow ended slightly higher, outperforming the broader market, buoyed by a 4 percent gain in Procter & Gamble.
A jump in April orders for long-lasting manufactured goods, such as refrigerators and toasters, showed that the U.S. economy may be stronger than some had thought.
"A day like today is clear evidence that there is still money on the sideline to get into equities, (and investors are) looking for almost any excuse to get in," said Tim Ghriskey, chief investment officer of Solaris Asset Mangment in Bedford Hills, New York.
"This has been happening all week. Investors are taking advantage of down days to put more cash to work, especially when the decline is not based on something fundamental."
Trading has been choppy in the second half of the week as market participants assess the Federal Reserve's evolving stance toward markets. The Fed's stimulus measures have been instrumental in a rally that has driven U.S. stocks to record highs this year.
Even as there is some fear that the Fed will exit too soon, many analysts say the eventual tapering of the central bank's stimulus will come with an expansion of the economy and corporate earnings, which will continue to support equities.
Joe Bell, a senior equity analyst at Schaeffer's Investment Research in Cincinnati, said many people had been giving only "the Fed credit for this rally" and had "not been talking about some of the improvement in the labor market or housing data.
"The economy in general has been on a lot better footing than perhaps people have given it credit for," Bell said.
The Dow Jones industrial average gained 8.60 points, or 0.06 percent, to 15,303.10 at the close. The Standard & Poor's 500 Index edged down only 0.91 of a point, or 0.06 percent, to finish at 1,649.60. The Nasdaq Composite Index dipped 0.27 of a point, or 0.01 percent, to close at 3,459.14.
For the week, the Dow fell 0.3 percent, while the S&P 500 and the Nasdaq each dropped 1.1 percent. The S&P 500 had traded below its 14-day moving average - 1,647.91 - during the day but closed just couple of points above the level.
Procter & Gamble shares rose 4 percent to close at $81.88 after the world's largest household products maker brought back A.G. Lafley as chief executive Thursday, replacing Bob McDonald in the midst of a major restructuring.
Tesla Motors rose to a fresh 52-week high on Friday as short interest fell, suggesting another bout of short-covering in the electric car maker's shares.
Tesla jumped 4.7 percent to $97.08 after rising as high as $97.95. At the same time, shares borrowed as a percentage of outstanding shares fell to 12.3 percent as of Thursday, according to data from Markit. That's well off a level of more than 20 percent that was seen just a few weeks ago.
A wave of short-covering earlier in the month drove huge gains in Tesla. The stock's price has more than doubled since the beginning of April.
Abercrombie & Fitch was among the S&P 500's biggest losers after the teen clothing retailer cut its profit forecast and said quarterly comparable sales fell 15 percent, which it blamed in part on inventory shortages. Its stock lost 8 percent to $50.02.
Shares of Sears Holdings plummeted 13.6 percent to $50.25 after the U.S. retailer reported a bigger-than-expected quarterly loss on Thursday. Sears said cooler spring weather hurt its results.
Overall, the U.S. stock market's pullbacks have been short and shallow since November as traders have taken any weakness as an opportunity to increase long positions.
Since Wednesday, the markets have been focused on the possibility that the Fed's $85 billion per month in bond purchases will be scaled back later this year, in the wake of recent congressional testimony by Fed Chairman Ben Bernanke and the minutes from the Federal Open Market Committee's latest meeting.
The minutes showed a degree of fracture among the FOMC's members "in terms of the approach moving forward, specifically the time frame" of the unwinding of the Fed's stimulus efforts, said Peter Kenny, chief market strategist at Knight Capital in Jersey City, New Jersey.
Durable goods orders rose 3.3 percent in April, exceeding expectations for an increase of 1.5 percent. The data suggested that a sharp slowdown in factory output could soon run its course.
Volume was roughly 5.2 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, lower than the year-to-date average daily closing volume of about 6.4 billion.
On the NYSE, decliners beat advancers by a ratio of 16 to 13. On the Nasdaq, the opposite trend prevailed, with 13 stocks rising for about every 12 that fell.