* GE reports sharp jump in profits
* McDonald’s tops estimates
* Euro zone leaders agree on second rescue package
* Dow off 0.4 pct, S&P off 0.2 pct, Nasdaq up 0.2 pct
* For up-to-the-minute market news see [STXNEWS/US] (Updates to midday)
By Aleksandra Michalska
NEW YORK, July 22 (Reuters) - The Dow fell on Friday after disappointing results from Caterpillar and Microsoft, reversing optimism after a strong week of earnings.
Caterpillar Inc (CAT.N) fell 5.2 percent to $105.80 after its profits missed estimates and it said the U.S. recovery was weaker than expected.
The heavy equipment maker has an out-sized influence on markets because it is seen as a barometer of economic activity. For details, see [ID:nN1E76L04K]
Caterpillar’s stock, the best performing Dow component in 2010, was the average’s top drag on Friday.
Microsoft Corp (MSFT.O) posted a greater-than-expected jump in fourth-quarter profit but sales of its flagship Windows software disappointed for the third straight quarter. The Dow component dipped 0.1 percent to $27.07. [ID:nN1E76K1RP]
“We had a little bit of shortfall from Caterpillar,” said Anthony Conroy, head trader at BNY ConvergEx, an affiliate of the Bank of New York. “It’s taking the market off a little bit.”
He noted that stocks have had “a nice run-up in the past couple of days,” explaining some of the selling.
The Dow Jones industrial average .DJI was down 47.30 points, or 0.37 percent, at 12,677.11. The Standard & Poor's 500 Index .SPX dipped 2.03 points, or 0.15 percent, at 1,341.77. The Nasdaq Composite Index .IXIC was up 6.28 points, or 0.22 percent, at 2,840.71.
General Electric Co (GE.N) dipped 0.5 percent to $19.07, even as it reported a 21.6 percent jump in quarterly profit.
McDonald’s Corp’s (MCD.N) income topped estimates, sending the stock up 3 percent to $89.06. [ID:nN1E76L01U] and [ID:nN1E76L03N]
At an emergency summit on Thursday, euro zone leaders promised a second Greece bailout with an extra 109 billion euros ($157 billion) of government money, plus a contribution by private sector bondholders that could top 50 billion euros by mid-2014. [ID:nL6E7IK2VL]
Worries that euro-zone debt contagion could hurt U.S. banks have pressured equities in recent weeks.
Verizon Communications Inc (VZ.N) swung to a second-quarter profit that beat expectations and named a new chief executive officer. The stock dropped 2.7 percent to $36.56. [ID:nL3E7IM1QL]
Equities were also being pressured by the wrangling over a deal to raise the U.S. debt ceiling. Negotiations between U.S. President Barack Obama and the top Republican in Congress were not close to producing an agreement, lawmakers said. [ID:nN1E76K2FL] (Editing by Jeffrey Benkoe)