US STOCKS-Nasdaq, S&P fall on tech sell-off, Dow flat

* Nasdaq down 1.6 percent, S&P 0.5 percent, Dow flat

* Google, Microsoft fall after earnings disappoint

* Citigroup jumps on smaller-than-expected loss (Updates to midday, adds byline)

By Cal Mankowski

NEW YORK, July 18 (Reuters) - The Nasdaq and S&P 500 stock indexes fell on Friday after disappointing results from Google Inc (GOOG.O) and Microsoft Corp (MSFT.O) drove a technology sell-off.

Financial stocks continued to rebound, however, after No.1 U.S. bank Citigroup (C.N) reported a smaller-than-expected quarterly loss, giving the sector a lift for the third straight session and helping limit losses in the Dow.

Microsoft shares fell more than 7 percent, and the software maker was a top drag on both the Dow and the S&P 500, while shares of Google slid more than 9 percent, making it the top drag on the Nasdaq.

Bucking the tech earnings trend, computer services company IBM (IBM.N) reported a 22 percent rise in profit, lifting its shares 2 percent and helping prevent the Dow falling further.

"It's a normal consolidation after two very strong days which were marked primarily by a lot of short covering in the financials," said Fred Dickson, market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.