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* Merck slides on warning $2.1 bln hit to FY sales
* Tech earnings in focus later in the week
* Fed's two-day policy meeting starts on Tuesday
* Indexes mixed: Dow up 0.23%, S&P flat, Nasdaq down 0.69% (Adds comments; updates prices)
By C Nivedita and Shreyashi Sanyal
April 28 (Reuters) - The S&P 500 and Nasdaq erased early gains on Tuesday as a plunge in consumer confidence underlined the extent of the economic damage from the coronavirus pandemic, while healthcare stocks slumped after a sales warning from Merck.
The U.S. drugmaker fell 3% after saying it expected the outbreak to reduce 2020 sales by more than $2 billion as a big drop in doctors' office visits take a hefty toll.
The wider S&P healthcare index shed 1.5%, falling for the first time in five days, as investors were also unimpressed by Pfizer Inc's quarterly profit beat.
Microsoft Corp and Amazon.com Inc shed more than 1.4%, with investors booking profits heading into the biggest week for first-quarter earnings for tech-related firms, while the banking subindex added 1.9%.
"As we go into earnings, people are getting nervous about all the concentration in the key (technology) stocks and they are probably taking a bit off the table," said Thomas Hayes, managing member at Great Hill Capital LLC in New York.
Wall Street has recovered more than 30% from its March lows, thanks to aggressive stimulus efforts and, more recently, on signs of states moving toward partial reopening.
Still, the benchmark S&P 500 index remains 17% away from reclaiming a record high hit in February and analysts have warned of further declines if a deep global recession sets in.
Latest data showed U.S. consumer confidence tumbled in April as the lockdown measures crushed economic activity and threw millions of Americans out of work. Focus now turns to U.S. first-quarter GDP figures due Wednesday, with economists expecting a contraction of 4%.
"It's a catch-22 sort of situation," said Adam Vettese, analyst at investment platform eToro in London.
"The longer the lockdown, we could be in for worse economic data. That said, if we lift it too early and see a resurgence in cases, then also we are in a bad situation, which could then lead to more bad economic data."
Investors are also awaiting the outcome of a two-day Federal Reserve policy meeting that begins later in the day, although expectations are low for more central bank easing.
At 11:41 a.m. ET the Dow Jones Industrial Average was up 56.66 points, or 0.23%, at 24,190.44, the S&P 500 was up 0.92 points, or 0.03%, at 2,879.40 and the Nasdaq Composite was down 60.38 points, or 0.69%, at 8,669.79.
Boosting the Dow, 3M Co, the world's biggest maker of N95 respirator masks, gained 2.6% after reporting a better-than-expected quarterly profit, although it suspended its 2020 forecast due to the health crisis.
Harley-Davidson Inc jumped 12% as it took more steps to boost its cash reserves to deal with the drop in motorcycle sales due to lockdowns.
Advancing issues outnumbered decliners more than 2-to-1 on the NYSE and almost matched them on the Nasdaq.
The S&P index recorded 11 new 52-week highs and one new low, while the Nasdaq recorded 46 new highs and one new low. (Reporting by C Nivedita and Shreyashi Sanyal in Bengaluru; Editing by Sagarika Jaisinghani, Arun Koyyur and Anil D'Silva)