Wall Street drops, ending three-day rally, on Europe concerns

NEW YORK (Reuters) - Stocks fell on Friday ,following three days of earnings-driven gains, on renewed concerns about Europe as a region of Spain said it would seek the central government's help to repay its debt.

The news added to a cautious tone following results from General Electric Co , which posted revenue that was below expectations because of weakness in Europe. Its earnings still beat forecasts and the stock rose 1.4 percent to $20.07.

Wall Street had rallied for the past three days as robust U.S. corporate earnings, especially in the technology sector, briefly took the spotlight away from Europe. However, news that Spain's heavily indebted eastern region of Valencia would apply for help under the government's 18 billion euro plan gave investors another reason to take profits.

In addition, Spain said it sees its economy contracting by 0.5 percent in 2013, with unemployment above 23 percent through 2014.

"The news from Europe continues to be a smoldering mess, and it will be a long convoluted process before things are resolved there," said John Kattar, who helps oversee $1.7 billion in assets as chief investment officer at Eastern Investment Advisors in Boston.

"We're starting to see some blowback from Europe in corporate results, where a lot of companies, including GE, have missed on revenue because of the problems there."

The Dow Jones industrial average was down 69.85 points, or 0.54 percent, at 12,873.51. The Standard & Poor's 500 Index was down 7.86 points, or 0.57 percent, at 1,368.65. The Nasdaq Composite Index was down 18.33 points, or 0.62 percent, at 2,947.57.

For the week, the Dow is up 0.6 percent, the S&P is up 0.8 percent and the tech-heavy Nasdaq is up 1.3 percent. The S&P recently hit its highest level since early May. Some investors are pointing to a trading range between recent highs above 1,400 and a low in June around 1,280.

Earnings from technology and bank shares have helped drive the S&P to a 2-1/2 month high in recent days. Still, weak data, including on manufacturing and employment, served as reminders of the economic headwinds facing markets, prompting some investors to lock in gains on Friday.

Of the 19 percent of S&P 500 companies reporting earnings so far, 65 percent have beaten expectations, slightly better than the yearly average since 1994, according to Thomson Reuters data.

Microsoft Corp reported adjusted earnings and revenue that beat expectations, while Google Inc's revenue surged 21 percent, easing worries a sluggish global economy would take a toll on the company's online advertising. Both results were released late Thursday.

On a net basis, Microsoft posted its first-ever net quarterly loss as a public company because of a previously announced writedown on the value of an ailing unit. The stock was flat at $30.66. Google added 1.7 percent to $603.38.

In other earnings news, Schlumberger Ltd climbed 1.6 percent to $69.73 as revenue rose more than expected on international growth. Xerox Corp fell 2.5 percent to $7.01 after cutting its full-year profit forecast.

(Editing by Bernadette Baum)