* GE, IBM shares drop after earnings
* Preliminary July UMich reading misses expectations
* Indexes up: Dow 0.23 pct, S&P 0.35 pct, Nasdaq 0.61 pct (Updates to open; adds quote, data)
By Chuck Mikolajczak
NEW YORK, July 18 U.S. stocks rebounded modestly on Friday, after the S&P 500 suffered its worst decline since April 10, but the benchmark index remained on track for a second straight weekly decline.
Investors will continue to keep a close eye on geopolitical tensions, as world leaders demanded an investigation after a Malaysian airliner was downed at the Ukraine-Russia border and Israel announced the start of a Gaza ground campaign on Thursday.
The CBOE Volatility index dropped 8.1 percent to 13.36, after a 32 percent surge to 14.54 in the prior session - its biggest jump since April 2013. The index still remains well below its historical average of around 20.
Google Inc gained 2.2 percent to $593.52 as the biggest boost to the S&P 500 after the world's No.1 Internet search company posted second-quarter results and said its chief business officer would leave the company.
"It seems counter-intuitive given the ruthlessness with which the market sold off yesterday, but in the broader context the markets are generating a lot of attractive themes," said Peter Kenny, chief market strategist at Clearpool Group in New York.
"We have an economy that is expanding - we have many data points that support that narrative - we are in the middle of earnings season and earnings season has given investors reason to believe that what we have seen in the headlines over the last day or two, though very important, aren't what is driving investment decisions."
General Electric shed 1.2 percent to $26.30 after the conglomerate posted growth in second-quarter earnings that matched expectations.
Fellow Dow component IBM also lost ground, down 0.7 percent to $191.21 after the world's largest technology company reported its software business grew less than expected even as quarterly earnings beat analysts' expectations.
But Honeywell International, a maker of aircraft cockpit parts and other electronic equipment, raised the lower end of its 2014 profit forecast range and reported better-than-expected quarterly profit. Its shares gained 0.8 percent to $95.97
The Dow Jones industrial average rose 38.66 points or 0.23 percent, to 17,015.47, the S&P 500 gained 6.9 points or 0.35 percent, to 1,965.02 and the Nasdaq Composite added 26.59 points or 0.61 percent, to 4,390.04.
The Thomson Reuters/University of Michigan's preliminary July reading on the overall index on consumer sentiment came in at 81.3, below both the consensus analyst expectation of 83 and the final June read of 82.5.
S&P 500 companies' profits are expected to grow 4.9 percent in the second quarter, according to Thomson Reuters data, down from the 8.4 percent growth forecast at the start of April. Revenue is seen up 3 percent.
Thomson Reuters data also shows that of 66 companies in the S&P 500 that reported earnings through Thursday morning, 68.2 percent beat Wall Street expectations, roughly in line with the 67 percent rate for the past four quarters and above the 63 percent rate since 1994. (Editing by Bernadette Baum)