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Wall Street's five-day rally falters ahead of earnings

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(Reuters) - U.S. stocks edged about 0.4 percent lower on Friday as investors booked profits after a five-day rally and reset positions ahead of the earning season, which will begin with big Wall Street banks next week.

The rally – built on optimism over China-U.S. trade talks, strong U.S. jobs data and the Federal Reserve's promise of patience with interest rate hikes – added 6 percent to the S&P 500 .SPX, lifting it about 10 percent from the 20-month low it hit around Christmas.

“We’re viewing today a little bit of a breather. The fact that we’ve been up so many days in a row, it’s not surprising to see a little bit of a break,” said Chad Oviatt, director of investment management at Huntington Private Bank in Columbus, Ohio.

The S&P financial index .SPSY was trading flat, shrugging off earlier losses. Citigroup Inc (C.N), which will report earnings on Monday, rose 0.9 percent after agreeing to give shareholder ValueAct Capital more access to its books and board of directors.

“Most investors are going to be gauging them (banks) on a little bit of a broader economic base than normal, in that interest rates and Fed are going to have an impact,” said Oviatt.

The consumer staples .SPLRCS and real estate sectors .SPLRCR logged slight gains. Nine of the 11 major S&P sectors were lower, led by the energy index’s .SPNY 0.9 percent fall as oil prices LCOc1 dropped after nine days of gains. [O/R] U.S. stocks took a severe beating in the last quarter of 2018 due to worries over trade, rate hikes and a slowdown in global growth, leaving investors worried that U.S. corporate profit may not match the roughly 25-percent growth rate in the first three quarters.

The S&P 500 companies on average are estimated to have posted 14.5 percent growth in fourth-quarter profit, according to IBES data from Refinitiv.

That is lower than the 20.1 percent growth estimated three months back as analyst cut forecasts after warnings from marquee companies, including Apple Inc (AAPL.O) and Macy’s Inc (M.N).

General Motors (GM.N) bucked that trend on Friday with a strong earnings forecast for 2019, sending the automaker’s shares surging 8.6 percent.

At 1:13 p.m. ET, the Dow Jones Industrial Average .DJI was down 100.19 points, or 0.42 percent, at 23,901.73, the S&P 500 .SPX was down 8.71 points, or 0.34 percent, at 2,587.93 and the Nasdaq Composite .IXIC was down 33.11 points, or 0.47 percent, at 6,952.96.

Technology stocks .SPLRCT, which led the recent surge, fell 0.5 percent as Microsoft Corp (MSFT.O) was down 1.8 percent and Apple dropped 1.2 percent.

Netflix Inc (NFLX.O), already up over 20 percent this year, rose another 3.5 percent on analysts’ optimistic forecasts for subscriber growth ahead of its earnings next week.

Activision Blizzard Inc (ATVI.O) slid over 10 percent, the most on the S&P, after it transferred publishing rights for its “Destiny” video game franchise to Bungie.

Advancing issues outnumbered decliners by a 1.02-to-1 ratio on the NYSE, while declining issues outnumbered advancers for a 1.01-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs or lows, while the Nasdaq recorded 14 new highs and eight new lows.

Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta and Arun Koyyur

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