* Nasdaq down 1.6 percent, S&P 0.5 percent, Dow flat
* Google, Microsoft fall after earnings disappoint
* Citigroup jumps on smaller-than-expected loss
(Updates to midday, adds byline)
By Cal Mankowski
NEW YORK, July 18 (Reuters) - The Nasdaq and S&P 500 stock
indexes fell on Friday after disappointing results from Google
Inc <GOOG.O> and Microsoft Corp <MSFT.O> drove a technology
sell-off.
Financial stocks continued to rebound, however, after No.1
U.S. bank Citigroup <C.N> reported a smaller-than-expected
quarterly loss, giving the sector a lift for the third straight
session and helping limit losses in the Dow.
Microsoft shares fell more than 7 percent, and the software
maker was a top drag on both the Dow and the S&P 500, while
shares of Google slid more than 9 percent, making it the top
drag on the Nasdaq.
Bucking the tech earnings trend, computer services company
IBM <IBM.N> reported a 22 percent rise in profit, lifting its
shares 2 percent and helping prevent the Dow falling further.
"It's a normal consolidation after two very strong days
which were marked primarily by a lot of short covering in the
financials," said Fred Dickson, market strategist at D.A.
Davidson & Co in Lake Oswego, Oregon.
Dickson said Google is a "key leadership stock" and as such
is subject to heavy selling in the event of an earnings
shortfall.
The Dow Jones industrial average <> declined 11.07
points, or 0.10 percent, to 11,435.59. The Standard & Poor's
500 Index <.SPX> fell 5.91 points, or 0.47 percent, to
1,254.41. The Nasdaq Composite Index <> lost 38.29 points,
or 1.66 percent, to 2,274.01.
The Dow gained nearly 500 points Wednesday and Thursday as
stronger-than-expected bank results allayed fears about the
health of the U.S. banking system on the heels of a government
takeover of California-based mortgage lender IndyMac.
Oil <CLc1> prices rose on Friday, reversing three days of
declines and providing another hurdle for stocks.
Shares of Google, the Internet search company, fell to
$484.28 on Nasdaq after the company posted a
smaller-than-expected 35 percent rise in net profit. For
details, see [].
Microsoft shares slid to $25.40 after the software maker
gave a forecast below Wall Street's expectations.
[].
Other tech decliners were iPod maker Apple Inc <AAPL.O>,
down 3 percent at $165.56, and Advanced Micro Devices Inc
<AMD.N>, down 12 percent to $4.65 after reporting a
larger-than-expected quarterly loss.
Shares of International Business Machines Corp, however,
rose 2.5 percent to $129.64.
Citigroup jumped more than 10.4 percent to $19.83 after the
Dow component reported a smaller-than-expected $2.5 billion
loss and said it would keep cutting costs and getting rid of
risky or poorly performing assets. [].
The positive news from Citi was a sharp contrast to
disappointing news of a larger-than-expected quarterly loss
from Merrill Lynch <MER.N>, whose stock fell more than 2
percent to $30.01.
After declining about $15 in three days, oil prices turned
higher on Friday, rising 0.9 percent to $130.43 a barrel.
(Additional reporting by Ellis Mnyandu; Editing by James
Dalgleish)
