US STOCKS-Stocks slip on Microsoft, economic woes

* Microsoft falls after missing expectations, cutting jobs

* Data on U.S. jobless, housing fuel worries over economy

* Apple up after profit beats expectations

* Dow off 1.9 pct, S&P off 2.1 pct, Nasdaq off 2.7 pct

* For up-to-the-minute market news, click [STXNEWS/US] (Updates to midmorning)

By Leah Schnurr

NEW YORK, Jan 22 (Reuters) - U.S. stocks tumbled on Thursday, dragged down by a surprisingly grim earnings report from Microsoft Corp (MSFT.O) and economic data that showed further deterioration in the labor and housing markets.

Microsoft, raising worries over how it would fare in the economic slowdown, said it would cut up to 5,000 jobs over the next 18 months and that it could no longer offer profit forecasts for the rest of the fiscal year. For more details, see [ID:nN22530524]. The stock was among the Dow's biggest drags, falling 8 percent.

"It is a negative surprise for the market, certainly from a bellwether technology company. For Microsoft to miss its guidance, it brings home the pervasive fallout from the credit crisis," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati, Ohio.

"On Wednesday, we had been able to bounce from the 8,000 level on the Dow. This (Microsoft news) make it inevitable to retest the November lows for the market."

The results, which had been expected to be released later in the day, added to the already negative tone after data showing the number of workers filing new claims for jobless benefits rose by more than expected last week, while housing starts and permits fell to a record low in December, data showed. [ID:nN22525475] [ID:nN21489514].

The Dow Jones industrial average .DJI was down 159.54 points, or 1.94 percent, at 8,068.56. The Standard & Poor's 500 Index .SPX fell 17.49 points, or 2.08 percent, at 822.75. The Nasdaq Composite Index .IXIC lost 41.06 points, or 2.72 percent, to 1,466.01.

The job cuts from Microsoft were among the latest by companies forced to shed jobs as they deal with slowing consumer demand and the global economic downturn. Microsoft's news came on the heels of Intel (INTC.O) saying it would cut as many as 6,000 jobs, while U.S. chemical maker Huntsman Corp (HUN.N) said it plans to cut about 1,175 jobs.

Intel, the world's largest maker of microprocessors, was down 3.9 percent at $12.74, while Microsoft shed 8 percent to $17.83.

eBay (EBAY.O) lost 11.5 percent to $11.76 after it gave a disappointing outlook for its current quarter as consumer spending declined, highlighting concerns that consumers will continue tightening their belts in the recession.

Apple (AAPL.O) was a standout to the upside and was among the biggest lifts on the Nasdaq after it posted quarterly profit that surpassed Wall Street's expectations on Wednesday after the closing bell. Shares of the iPod maker were up more than 7 percent at $89.07.

Investors will be watching for a vote by the U.S. Senate Finance Committee on the nomination of Timothy Geithner to be Treasury secretary expected later in the day.

Geithner faced tough questioning at his confirmation hearing before the committee on Wednesday. Wall Street had originally cheered Geithner's nomination but the choice has since come under controversy over Geithner's failure to pay some taxes. (Additional reporting by Richard Leong)