(Reuters) - Stocks dropped for a fifth straight day on Friday after weak data on the economy and a setback on a debt deal discouraged investors, pushing the S&P 500 briefly below a key technical level.

The Dow, the Nasdaq as well as the S&P fell more than 1 percent early in the session, but soon pared losses after the S&P hit its 200-day moving average, an important level of technical support.

The U.S. economy grew less than expected in the second quarter, expanding at a 1.3 percent annual rate, as consumer spending barely rose amid higher gasoline prices.

Further pressuring the market, a survey found consumer sentiment fell in July to its lowest point in more than two years as anxiety over stagnant wages and rising unemployment deepened.

"This leads me to believe that unless something dramatic happens, we won't get much economic growth in the second half of the year. That's concerning," said Malcolm Polley, president and chief investment officer of Stewart Capital Advisors in Indiana, Pennsylvania.

The Dow Jones industrial average .DJI fell 80.03 points, or 0.65 percent, at 12,160.08. The Standard & Poor's 500 Index .SPX was down 8.22 points, or 0.63 percent, at 1,292.45. The Nasdaq Composite Index .IXIC dropped 19.68 points, or 0.71 percent, at 2,746.57.

Wall Street was on track to post its worst weekly losses in more than a year.

The S&P has lost 3.9 percent so far this week. The last time the index fell this much on a weekly basis was in early July last year.

Republican leaders scrambled to rescue their budget deficit-cutting plan Friday after conservatives mounted a rebellion that heaped uncertainty on efforts by Washington to avert a debt default.

Chevron Corp (CVX.N), the second-largest U.S. oil company, reported a 43 percent jump in quarterly profit, beating estimates as strong oil prices and fatter refinery margins offset a drop in oil output. Still, shares fell 0.4 percent to $104.55.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)

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