* Wells Fargo net interest margin drops, profit jumps
* Boeing falls as Dreamliner hit by two more incidents
* Best Buy shares rally after holiday sales report
* Indexes: Dow flat, S&P off 0.2 pct, Nasdaq off 0.1 pct
By Angela Moon
NEW YORK, Jan 11 (Reuters) - U.S. stocks dipped on Friday, weighed by losses in the banking sector, after Wells Fargo & Co reported a decline in net interest margin despite a record profit in the latest quarter.
"It (Wells Fargo results) is weighing on the sector. We are keeping our fingers crossed that this won't be a sector thing and more confined to Wells Fargo, but it's definitely playing a factor today," said Larry Peruzzi, senior equity trader at Cabrera Capital Markets LLC in Boston.
Wells Fargo, the fourth-biggest U.S. bank and the nation's largest home lender, said its fourth-quarter net interest margin - a key measure of how much money banks make from loans - fell, even as profit jumped 24 percent. The bank also made fewer mortgage loans than in the third quarter.
The bank's shares were down more than 1 percent at $35.02. The S&P 500 financial sector index fell 0.5 percent and the KBW Banks index fell 0.9 percent.
Wells Fargo was the first big U.S. bank to report fourth-quarter results. Bank of America Corp, JPMorgan Chase & Co and Citigroup Inc are due to report next week.
The Dow Jones industrial average was up 0.70 points, or 0.01 percent, at 13,471.92. The Standard & Poor's 500 Index was down 2.56 points, or 0.17 percent, at 1,469.56. The Nasdaq Composite Index was down 4.49 points, or 0.14 percent, at 3,117.27.
Keenly watched Friday were also shares of Dow component Boeing, which fell 2.4 percent to $75.25 after a cracked cockpit window and an oil leak on separate flights in Japan added to other mishaps earlier in the week, compounding safety concerns about its new 787 Dreamliner. The US Department of Transportation said the jet would be subject to a review of its critical systems by regulators.
Best Buy shares rallied after its results showed a bit of a turnaround in its U.S. stores, though same-store sales were flat during the key holiday season. Shares jumped 11.4 percent to $13.60.
Basic materials shares were pressured after China's annual consumer inflation rate picked up to a seven-month high, narrowing the scope for the central bank to boost the economy by easing monetary policy. The S&P basic materials sector fell 0.6 percent.
Dendreon Corp shares jumped 15.3 percent to $5.89 after Sanford C. Bernstein upgraded the drugmaker's stock to "outperform" from "market-perform" and said it could be one of the best performers in 2013.