* McDonald's lower quarterly profit misses estimate
* GE profit meets forecasts, revenue shy of estimates
* U.S. existing home sales fall as inventories drop
* Stocks off: Dow 0.7 pct, S&P 0.5 pct, Nasdaq 0.6 pct
By Angela Moon
NEW YORK, Oct 19 (Reuters) - U.S. stocks fell on Friday in the wake of disappointing results from Microsoft and Google a day earlier, with shares of General Electric dropping nearly 3 percent after reporting improved profit but falling short of revenue estimates.
Blue chip stocks led declines. General Electric Co shares fell 2.7 percent to $22.22 after the company reported quarterly revenue that was less than analysts had expected, crimped by a stronger dollar.
Still, GE reported growth in quarterly profit as U.S. and Asian demand for its electric turbines and railroad locomotives offset the impact of slowing European growth and demand.
McDonald's Corp shares slumped 3.5 percent to $89.69 after the company reported a lower quarterly profit that missed analysts' expectations.
Despite the day's declines, the S&P 500 has advanced 1.4 percent this week so far. The Dow is up 1 percent and the Nasdaq is up 0.2 percent for the week.
Peter Cecchini, managing director at Cantor Fitzgerald in New York, said he rarely remembered a time when blue chips "slumped the way they did this week, and the broader market, especially the S&P, did not fade thereafter."
Out of the 116 S&P 500 companies which have reported so far in this earnings season, 60 percent have exceeded analysts' estimates. Earnings are expected to drop 1.8 percent in the third quarter from a year ago, according to Thomson Reuters data, compared with a forecast drop of 2.3 percent earlier in the week.
Data showed U.S. home resales fell in September as the stock of properties on the market dropped, a reminder that America's housing sector is a long way from a full recovery despite recent signs of improvement. Market reaction was muted.
The Dow Jones industrial average was down 92.04 points, or 0.68 percent, at 13,456.90. The Standard & Poor's 500 Index was down 7.60 points, or 0.52 percent, at 1,449.74. The Nasdaq Composite Index was down 17.49 points, or 0.57 percent, at 3,055.38.
"We believe it is still premature to conclude that the rally that began in June is over, and we would need to see the S&P break below 1400, the five month relative performance uptrend of stocks versus bonds reverse," said Robert Sluymer, analyst at RBC Capital Markets in New York.
Diversified U.S. manufacturer Honeywell International Inc reported a 10 percent rise in quarterly earnings as declining natural gas prices helped boost profit at its UOP chemical arm, offsetting weakness in Europe. The stock rose 0.7 percent to $61.88.
Microsoft Corp's said late Thursday its quarterly profit fell a greater-than-expected 22 percent, as sales of computers running its Windows operating system dipped and some revenue was deferred ahead of the upcoming releases of its core Windows and Office products. The stock was down 2 percent at $28.91.
U.S. stocks fell on Thursday, with technology stocks hit hard after Google's surprisingly weak earnings disappointed investors.
Today marks the 25th anniversary of the stock market crash of 1987, or Black Monday, when the Dow Jones index plummeted 22 percent for the worst single-day percentage loss on Wall Street.