* Initial claims fall, housing starts short of estimates
* Morgan Stanley climbs after earnings
* Microsoft to cut up to 18,000 jobs, 14 percent of workforce
* Indexes off: Dow 0.07 pct, S&P 0.15 pct, Nasdaq 0.21 pct (Updates to market open, adds quote)
By Chuck Mikolajczak
NEW YORK, July 17 (Reuters) - U.S. stocks edged lower on Thursday in the wake of fresh U.S. and European Union sanctions on Russia, but some stronger-than-expected earnings reports helped keep declines in check.
The U.S. sanctions announced late Wednesday hit some of Russia's biggest firms while the EU sanctions were aimed at Russian companies that help destabilize Ukraine and will block new loans to Russia through two multilateral lenders. The Market Vectors Russia ETF dropped 3.9 percent.
As earnings season continues, Morgan Stanley shares advanced 1.3 percent to $32.91 after the bank's second-quarter earnings more than doubled, beating estimates.
Microsoft shares rose 2.9 percent to $45.34 after the company said it would cut up to 18,000 jobs, or about 14 percent of its workforce, resulting in pre-tax charges of $1.1 billion to $1.6 billion over the next four quarters.
Fellow Dow component UnitedHealth Group gained 2.1 percent to $85.57 after the largest U.S. health insurer reported higher-than-expected revenue and raised its forecast.
"Morgan Stanley was great, UnitedHealthcare great - clearly not everybody is doing great but overall the major companies came in better," said Kate Warne, investment strategist at Edward Jones in St. Louis.
"If there were really just Russian sanctions and nothing was positive, you could easily see stocks down a lot more as people worried about the impact and remembered the rest of the world is still a risky place."
The Dow Jones industrial average fell 11.43 points or 0.07 percent, to 17,126.77, the S&P 500 lost 2.95 points or 0.15 percent, to 1,978.62 and the Nasdaq Composite dropped 9.29 points or 0.21 percent, to 4,416.68.
Housing starts were well short of expectations in June, as groundbreaking declined 9.3 percent to a seasonally adjusted annual 893,000 million unit-pace, the lowest since September. The PHLX housing index lost 0.9 percent.
But initial jobless claims dropped 3,000 to a seasonally-adjusted 302,000 for the week ended July 12 versus expectations of 310,000.
Also on the positive side, factory activity in the U.S. mid-Atlantic region grew at a faster pace than expected in July, climbing to 23.9 from the 17.8 in the prior month and well above the 16 estimate.
S&P 500 companies' profits are expected to grow 4.9 percent in the second quarter, according to Thomson Reuters data, down from the 8.4 percent growth forecast at the start of April. Revenue is seen up 3 percent.
Thomson Reuters data also shows that of the 66 companies in the S&P 500 that have reported earnings through Thursday morning, 68.2 percent have topped Wall Street expectations, roughly in-line with the 67 percent rate for the past four quarters and above the 63 percent rate since 1994. (Editing by Bernadette Baum and Nick Zieminski)