* Netflix tumbles as U.S. subscribers drop
* Union Pacific rises after qtrly profit beat
* Morgan Stanley beats profit estimates
* Futures: Dow down 0.17%, S&P flat, Nasdaq off 0.07% (Changes comment, adds details; Updates prices)
By Medha Singh
July 18 (Reuters) - Wall Street's main indexes were set for a flat open on Thursday as investors awaited more developments around trade, while Netflix posted a surprise drop in U.S. subscribers, kicking off earnings for the FAANG group of stocks on a sour note.
Streaming pioneer Netflix Inc sank 10.4% premarket and was on pace to open at its lowest level since late-January, as it also missed targets for new subscribers overseas at a time when it has staked its future on global expansion.
Trade worries have been weighing on markets for the last few weeks and the disappointing earnings so far have just amplified that pressure, Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, said.
"Netflix did nothing to soothe investor concerns around what earnings prospects are likely to unfold over the next couple of weeks."
A recent rally in Wall Street's main indexes stumbled this week as second-quarter earnings roll in and investors await the Federal Reserve's policy meeting at the end of this month.
"With the run we've had in the market, conditions have been overbought and in that light the market have been right in releasing some of that pressure from the rally."
The three main indexes are headed for their sharpest weekly drop in seven weeks after hopes of an interest rate cut from the Federal Reserve helped them recover from a slump in May and hit record highs.
In trade-related news, U.S. Treasury Secretary Steven Mnuchin said that Beijing and Washington were set to talk over a phone call on Thursday.
At 8:56 a.m. ET, Dow e-minis were down 47 points, or 0.17%. S&P 500 e-minis were down 0.75 points, or 0.03% and Nasdaq 100 e-minis were down 5.75 points, or 0.07%.
Offering some support to markets was Union Pacific Corp , which rose 3.2% after reporting a profit beat, a day after its smaller rival CSX Corp's results raised concerns of trade dispute hurting the transportation sector.
Profit at S&P 500 companies is expected to rise 0.4% in second quarter, according to Refinitiv IBES data.
International Business Machines Corp fell 1.2% as it did not raise its full-year profit forecast even though its quarterly profit beat on strong growth in its high-margin cloud business.
EBay Inc jumped 5.4% after the e-commerce company posted better-than-expected quarterly revenue and profit, helped by growth in its advertising and payments businesses.
Morgan Stanley reported a drop in quarterly profit, but beat analysts' expectations on slim gains in its wealth management business and lower expenses. Its shares fell 1.3%.
Morgan Stanley rounds up earnings for the big Wall Street banks, which have raised concerns of lower interest rates hurting profits. (Reporting by Medha Singh and Amy Caren Daniel in Bengaluru; Editing by Arun Koyyur)