* Forecast-beating IBM, Citi results lead Dow higher
* Tech icons Google, Microsoft drag down Nasdaq
* Oil dips, off nearly 13 pct from last week's record high
* Dollar bolstered on Citigroup's less-than-expected loss
* Govt bond prices fall as flight to safety bid unwinds
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, July 18 (Reuters) - Favorable results from No. 1
U.S. bank Citigroup and technology leader IBM drove the Dow
higher on Friday, but the Nasdaq fell on disappointing results
from tech icons Google and Microsoft.
Oil prices fell for a fourth straight day as tensions eased
between Iran and the West and on growing concerns that a
sluggish economy will slash demand pushed oil lower.
Oil slipped below $129 a barrel, extending a slide that has
cut prices nearly 13 percent from last week's record peak.
The dollar rose against major currencies after Citigroup's
less-than-expected quarterly loss eased investors' grim outlook
for the U.S. financial sector.
U.S. and euro zone government debt prices fell as
Citigroup's results caused investors to unwind their recent
flight to safety.
Citigroup's less-than-expected $2.5 billion loss helped
financial stocks rally for a third straight session.
But Google and Microsoft helped drag the Nasdaq down more
than 1 percent. Google shares posted their the biggest one-day
percentage drop since the Web search company went public in
2004, after Google posted a weaker-than-expected rise in its
quarterly profit.
Microsoft shares declined the most in two years after the
software maker's quarterly results fell short of expectations.
"It's a very split market today, right along the financials
and technology lines," said Paul Nolte, director of investments
at Hinsdale Associates, in Hinsdale Illinois.
"Financials are actually moving higher, based on OK numbers
from Citigroup, but you had some big disappointing numbers from
tech, which is worrying," he said.
The Dow Jones industrial average <> closed up 49.91
points, or 0.44 percent, at 11,496.57. The Standard & Poor's
500 Index <.SPX> added 0.34 points, or 0.03 percent, at
1,260.66. The Nasdaq Composite Index <> fell 29.52 points,
or 1.28 percent, at 2,282.78.
The KBW Banks index <.BKX> rose almost 1 percent.
Shares of Google Inc <GOOG.O> slid 9.8 percent to $481.32,
and Microsoft Corp <MSFT.O shares shed 6.0 percent to $25.86.
International Business Machines Corp <IBM.N> bucked the
glum earnings trend among technology shares after its quarterly
earnings blew past Wall Street forecasts and it raised its
outlook. IBM was the biggest contributor to the Dow, and its
shares rose 2.7 percent to $129.89.
Citigroup <C.N> rose 7.7 percent to $19.35, adding more
than $5 since touching $14.01 earlier in the week.
Investors have long sought signs that Citigroup, the
largest U.S. bank by assets, may finally be ready to turn a
corner. The New York bank has been one of the hardest hit in a
global credit crisis that has festered since last summer,
But Citigroup Chief Financial Officer Gary Crittenden on a
conference call warned consumer credit costs might have a
"meaningful" impact on results for the rest of the year.
"Citi is exposed to every aspect of the economy," said Matt
McCormick, an analyst at Bahl & Gaynor Investment Counsel in
Cincinnati. "It's not like the movies where all of a sudden you
say, 'And they all lived happily ever after.'"
CITIGROUP EXTENDS RALLY IN EUROPE
In Europe, Citigroup spurred a rally in financial stocks.
The FTSEurofirst 300 index <.FTEU> of top European shares
closed 1.56 percent higher at 1,164.19 points, and gained about
3.2 percent for the week.
The DJStoxx European banks index <.SX7P> was 4.8 percent
higher.
UBS <UBSN.VX> jumped 7.6 percent and Royal Bank of Scotland
<RBS.L> soared 9.6 percent.
"Citigroup created a huge amount of positive excitement for
the very reason that they are not as bad as expected and the
markets gave them the benefit of the doubt," said Howard
Wheeldon, senior strategist at BGC Partners.
The dollar's rise reversed a down-trend for several years.
The latest downleg was sparked by concerns about the ability of
large banks and other institutions to cope with defaults on
imprudent home loans made during the housing bubble.
"Citi earnings have encouraged the market to take on more
risk and given (the dollar) a lift," said Stephen Malyon,
senior currency strategist at Scotia Capital in Toronto. They
were "consistent with other bank earnings seen earlier this
week which has turned sentiment around on the dollar a little
bit."
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
27/32 to yield at 4.10 percent. The 30-year U.S. Treasury bond
<US30YT=RR> fell 27/32 to yield 4.66 percent.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.24 percent at 72.196. Against the yen,
the dollar <JPY=> was up 0.62 percent at 106.91.
The euro <EUR=> fell 0.15 percent at $1.5838.
Oil's losses this week are the steepest in dollar terms
since futures began trading in New York in 1983 and the
steepest in percentage terms since December 2004.
U.S. crude <CLc1> settled down 41 cents at $128.88 a
barrel, marking the fourth straight day of losses. London Brent
crude <LCOc1> fell 88 cents to settle at $130.19 barrel.
Gold ended 1 percent lower as signs of financial market
stability reduced bullion's safe-haven appeal.
Spot gold <XAU=> traded down at $955.45 by New York's last
quote, having earlier slipped as low as $949.50 an ounce.
"The key reason why we have lower metals in the last couple
of days is because of less flight-to-safety buying and a better
atmosphere surrounding the financial system," said Bill
O'Neill, managing partner of LOGIC Advisors in Upper Saddle
River, New Jersey.
Asian stocks fell, hurt by resource-related shares stung by
oil's decline this week and by Merrill Lynch's weak results.
Japan's Nikkei share average <> slipped 0.7 percent
for its sixth straight losing week.
Shares in the Asia-Pacific region outside of Japan fell 1.1
percent, according to an MSCI index <.MSCIAPJ>, and were within
striking distance of Wednesday's 16-month low.
(Reporting by Matthew Robinson, Ellis Mnyandu, Nick Olivari
and Ellen Freilich in New York, and Patrizia Kokot, Santosh
Menon, Ikuko Kao, Jan Harvey in London; Writing by Herbert
Lash; Editing by Leslie Adler)
