US STOCKS-Wall Street drops on mixed earnings, jobless claims data

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* U.S. jobless claims post surprise increase
* Apple faces consumer protection probe -Axios
* Microsoft falls as cloud unit revenue growth slows
* Indexes fall: Dow 1.27%, S&P 1.30%, Nasdaq 2.42%

(Updates to late afternoon, changes dateline, byline)
By Stephen Culp
NEW YORK, July 23 (Reuters) - Wall Street retreated on
Thursday as mixed earnings, a surprise increase in U.S. jobless
claims and Washington's tug-of-war over stimulus measures fed
risk aversion among investors.
The sell-off steepened after Axios reported that Apple faces
a multi-state consumer protection probe. All three major U.S. stock averages were lower, with falling
momentum stocks Apple Inc AAPL.O , Microsoft Corp MSFT.O and
Amazon.com AMZN.O weighing heaviest.
"We keep seeing this push-pull rotation in and out of
cyclicals and large cap names," said Robert Pavlik, chief
investment strategist, senior portfolio manager at SlateStone
Wealth LLC in New York. "People believe that tech has had its
run and is looking expensive."
U.S. jobless claims unexpectedly ticked higher to 1.416
million last week, the Labor Department said. The number excludes recipients of Pandemic Unemployment
Assistance, set to expire on July 31.
Congress kept working to pass new stimulus before that
deadline continued, with Senate Republicans announcing they
could present their version of the bill to Democrats as early as
this week. Total U.S. coronavirus cases topped 4 million on Thursday,
with nearly 2,600 new cases every hour, on average, according to
a Reuters tally. "There's so much uncertainty about stimulus, the election,
earnings, the racial landscape and geopolitical tensions,"
Pavlik added. "And underlying everything is the uncertainty
about COVID-19 and the re-opening process."
The Dow Jones Industrial Average .DJI fell 343.25 points,
or 1.27%, to 26,662.59, the S&P 500 .SPX lost 42.66 points, or
1.30%, to 3,233.36 and the Nasdaq Composite .IXIC dropped
258.85 points, or 2.42%, to 10,447.28.
Of the 11 major sectors in the S&P 500, eight were in the
red, with tech shares .SPLRCT notching the largest percentage
drop.
Second-quarter reporting season is in full-stride, with 113
S&P 500 constituents having reported. Refinitiv data shows that
77% of those have beaten expectations that were extraordinarily
low. Analysts now see aggregate second-quarter S&P earnings
plummeting by 40.8%, year-on-year, per Refinitiv
Microsoft Corp MSFT.O dropped 4.1% after reporting its
cloud computing business Azure reported its first-ever quarterly
growth under 50%. Tesla Inc TSLA.O reported a profit for the fourth straight
quarter, setting the company up for inclusion in the S&P 500.
But the stock slid 6.0% as analysts questioned whether the
electric automaker's stock price matched its performance.
American Airlines Group Inc AAL.O jumped 3.8% after
announcing it would rethink the number of flights to add in
August and September. Also, it reported an adjusted
loss per share of $7.82. Airlines, battered by mandated lockdowns, reversed early
losses to cross well into the black. The S&P 1500 Airlines index
.SPCOMAIR was up 1.7%.
Twitter Inc TWTR.N rose 3.4% after reporting its
highest-ever annual growth of daily users. Declining issues outnumbered advancing ones on the NYSE by a
1.14-to-1 ratio; on Nasdaq, a 1.49-to-1 ratio favored decliners.
The S&P 500 posted 51 new 52-week highs and no new lows; the
Nasdaq Composite recorded 100 new highs and 13 new lows.