US STOCKS-Fears of surge in coronavirus death toll weigh on S&P, Nasdaq

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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

* Dow up 0.23%, S&P 500 flat, Nasdaq off 0.77% (Updates to early afternoon)

April 28 (Reuters) - The S&P 500 and Nasdaq indexes eased on Tuesday as scientists warned of an increase in U.S. coronavirus deaths if states lifted lockdowns too quickly, while healthcare stocks slumped after a sales warning from Merck.

The drugmaker fell 2.6% 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 S&P 500 healthcare index shed 1.4%, falling for the first time in five days.

Microsoft Corp and Inc shed nearly 2%, with investors booking profits heading into the biggest week for first-quarter earnings for tech-related firms.

“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.

But with U.S. coronavirus cases topping 1 million, a predictive model often cited by White House officials showed the outbreak could take more than 74,000 U.S. lives by August, compared with an earlier forecast of 67,000, if the lockdown were to be lifted too early.

“There seems to be a conflict of opinion about the proper course of action,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.

“As more insights back the belief that opening up early is not the best course of action right now, because if we do and if we get a relapse, then the next wave could even be worse.”

The benchmark S&P 500 index also 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.

U.S. consumer confidence tumbled in April as lockdown measures crushed economic activity and left million of Americans unemployed. Domestic first-quarter GDP figures are due Wednesday, with economists expecting a contraction of 4%.

Investors are also awaiting the outcome of a two-day Federal Reserve policy meeting, although expectations are low for more central bank easing.

The banking subindex rose 2.2%.

At 12:56 p.m. ET, the S&P 500 was down 0.68 points, or 0.02%, at 2,877.80 and the Nasdaq Composite was down 67.53 points, or 0.77%, at 8,662.63.

The Dow Jones Industrial Average was up 56.30 points, or 0.23%, at 24,190.08, boosted by a 2.4% gain in shares of 3M Co.

The world’s biggest maker of N95 respirator masks reported a better-than-expected quarterly profit, although it suspended its 2020 forecast due to the health crisis.

Harley-Davidson Inc jumped 14% as it took more steps to boost its cash reserves to deal with the drop in motorcycle sales due to lockdowns.

PepsiCo said surging demand for Lays and Doritos would only partially offset a hit to business in the second quarter from coronavirus lockdowns. Shares of the company rose 0.7%.

Advancing issues outnumbered decliners by a 2.61-to-1 ratio on the NYSE and a 1.42-to-1 ratio on the Nasdaq.

The S&P index recorded 12 new 52-week highs and one new low, while the Nasdaq recorded 48 new highs and two new lows. (Reporting by C Nivedita and Shreyashi Sanyal in Bengaluru; Editing by Sagarika Jaisinghani, Arun Koyyur and Anil D’Silva)