Fall in industrials, chip shares push market down

NEW YORK (Reuters) - U.S. stocks fell on Friday as declines in industrials, energy shares and some tech companies overshadowed strong earnings from Microsoft Corp .

The technology gains from Microsoft were countered by weakness in semiconductors after disappointing results from Broadcom Corp and MEMC Electronic Materials Inc .

Energy shares stumbled as Schlumberger Ltd fell 2.8 percent to $66.65 after the oilfield services company warned natural gas activity would remain weak until late 2010.

The S&P Energy index shed 1.2 percent.

Shares of Burlington Northern Santa Fe Corp , the second-biggest U.S. railroad, posted a 7.1 percent decline to $79.15, after reporting a 30 percent drop in quarterly profit. The stock helped drag industrials 1.2 percent lower.

"The reason we sold off is because we're still digesting all the earnings results we've had," said Thomas Nyheim, portfolio manager at Christiana Bank & Trust Co. in Greenville, Delaware.

The Dow Jones industrial average dropped 63.33 points, or 0.63 percent, to 10,017.98. The Standard & Poor's 500 Index fell 7.85 points, or 0.72 percent, to 1,085.06. The Nasdaq Composite Index shed 1.20 points, or 0.06 percent, to 2,164.09.

Nyheim cited disappointing sales as a headwind working against the market's rally. "There were some good results, but we're not seeing enough top-line growth. That creates the fear that we could see a jobless recovery."

In economic news, sales of previously owned U.S. homes surged to their highest level in over two years in September, a survey showed on Friday, providing further evidence the housing market was on the mend.

(Reporting by Chuck Mikolajczak; Additional reporting by Ryan Vlasetlica; Editing by Kenneth Barry)