(In 3rd paragraph, corrects spelling of name to Granski, not Granfki)
* Qualcomm surges on surprise settlement with Apple
* Healthcare stocks fall for 2nd straight day
* China's Q1 growth unexpectedly steadies
* IBM falls after revenue miss
* Indexes down: Dow 0.02%, S&P 0.18%, Nasdaq 0.06%
By Amy Caren Daniel and Sruthi Shankar
April 17 (Reuters) - U.S. stocks headed lower on Wednesday, as a selloff in healthcare stocks extended for a second day, overshadowing a rally in chipmakers led by Qualcomm.
The S&P healthcare index tumbled 2.5%, on pace to wipe out its yearly gains over concerns about potential changes to healthcare policy as 2020 presidential election looms.
"With a Democrat-controlled Congress, there is definitely more talk on regulating the sector and drug prices, which has negative headline risks," said Matthew Granski, director of strategy at Los Angeles-based Miracle Mile Advisors.
Medical device maker Abbott Laboratories Inc fell 3.8%, despite quarterly results beating estimates.
UnitedHealth Group Inc, Pfizer Inc and Merck & Co fell more than 2% and were the biggest drags on the broader S&P 500 index.
The weakness in healthcare stocks stalled early optimism after data showed China's economy unexpectedly steadied in the first quarter, assuaging concerns about a slowdown in the world's second-largest economy amid a trade war with the united States.
Chipmakers, which get a huge portion of their revenue from China, rallied, with the Philadelphia chip index rising more than 1%.
The top gainer was Qualcomm Inc, surging 10.4% after winning a major victory in its legal dispute with Apple Inc that called for the iPhone to once again use Qualcomm modem chips.
Intel Corp, up 3.4%, said it was exiting the 5G smartphone modem business.
With first-quarter earnings season in full swing, analysts now expect S&P 500 profits to have dropped 1.8% year-on-year. Though a solid improvement over recent estimates, it would still mark the first earnings contraction since 2016.
Of the 54 S&P 500 companies that have posted results so far, about 80% have beaten estimates, according to Refinitiv data.
"Investors were overly pessimistic about Q1 earnings, and so far you've seen a few beats and that will continue going forward because there is so much of negative expectations built in," Granfki said.
The Nasdaq 100 touched a record intraday high, surpassing the level hit in early October.
United Continental Holdings Inc advanced 4.7% after a better-than-expected jump in quarterly profit and fueled a 1.22% rise in the Dow Jones transport index.
An outlier among tech stocks was International Business Machines Corp, down 3.8% after reporting a bigger-than-expected drop in quarterly revenue.
At 12:55 p.m. ET, the Dow Jones Industrial Average was down 4.68 points, or 0.02%, at 26,447.98. The S&P 500 was down 5.30 points, or 0.18%, at 2,901.76 and the Nasdaq Composite was down 4.48 points, or 0.06%, at 7,995.75.
Morgan Stanley rose 2.3% after quarterly profit beat expectations, wrapping up earnings for big U.S. banks.
PepsiCo Inc gained 3.3% after its quarterly results beat Wall Street estimates.
Declining issues outnumbered advancers for a 1.26-to-1 ratio on the NYSE and for a 1.66-to-1 ratio on the Nasdaq.
The S&P index recorded 45 new 52-week highs and five new lows, while the Nasdaq recorded 61 new highs and 50 new lows. (Reporting by Amy Caren Daniel, Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Sriraj Kalluvila)