* Health stocks hit by judge ruling Obamacare unconstitutional
* Amazon, retailers drop on Britain's ASOS profit warning
* Banks gain ahead of widely expected Fed rate hike
* Goldman hits two-year low on Malaysia charges in 1MDB probe
* Indexes down: Dow 0.39 pct, S&P 0.32 pct, Nasdaq 0.18 pct (Changes comment, updates)
By Amy Caren Daniel
Dec 17 (Reuters) - Wall Street dropped on Monday, but recovered from a slide of over 1 percent, weighed down by an Amazon-led drop in retailers and weakness in health stocks, with gains in banks ahead of a widely expected rate hike limiting losses.
The S&P and Nasdaq briefly even turned higher, with the swings the latest example of the volatility that has plagued U.S. equities for most of this month and left them with their worst December performance in 16 years as of Friday.
S&P 500 retail stocks tumbled 1.5 percent after British online fashion retailer ASOS's profit warning led to concerns over consumer spending. Amazon.com Inc declined 2.1 percent and was the biggest drag on the S&P 500 and Nasdaq.
"Investors are fearful. Because of the profit warning, there is an overall question of holiday spending," said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.
The S&P healthcare index dropped 0.60 percent after a federal judge on Friday ruled that the Affordable Care Act, commonly known as Obamacare, was unconstitutional based on its mandate requiring people buy health insurance.
"The profitability of healthcare business is a big question mark and investors hate question marks," Forrest said.
Helping the market pull back were financials, which rose 0.39 percent, with banks gaining 0.61 percent ahead of the Federal Reserve's Tuesday-Wednesday monetary policy meeting.
Despite President Donald Trump again criticizing the Fed for "even considering" one, a fourth rate hike for the year is a near certainty. But investors are hoping the Fed may ease on hikes next year amid rising worries of slowing global growth.
"Trump's tweet adds to the nervousness about what the Fed is going to do. Are these tweets pushing them to be more hawkish than they should be because they want to look independent from the president?," said Forrest.
At 11:46 a.m. ET, the Dow Jones Industrial Average was down 109.17 points, or 0.45 percent, at 23,991.34, the S&P 500 was down 9.60 points, or 0.37 percent, at 2,590.35 and the Nasdaq Composite was down 16.14 points, or 0.23 percent, at 6,894.53.
The Dow ended Friday 10 percent below its record closing high to join the S&P and Nasdaq in what is known as correction territory.
While financials gained, Goldman Sachs Group Inc dropped 1.8 percent to a two-year low after Malaysia filed criminal charges against the bank and two former employees in connection with the 1MDB investigation. The stock is now the worst performer among the 30 Dow Industrials.
Insurer UnitedHealth Group Inc fell 1.3 percent on the Obamacare ruling and was the biggest drag on the Dow.
Johnson & Johnson continued its slide with a 2.5-percent drop after a Reuters report that the pharma major knew for decades that its Baby Powder contained asbestos.
Declining issues outnumbered advancers for a 1.61-to-1 ratio on the NYSE and a 1.18-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week high and 93 new lows, while the Nasdaq recorded six new highs and 381 new lows. (Reporting by Amy Caren Daniel in Bengaluru)