(Corrects to remove fifth bullet point "Breaks key support level at 25-day moving average"; the Nikkei did not fall below this level)
* Nikkei hurt by weaker U.S. tech and bank earnings
* Strong China GDP defies hopes for slowdown
* Foreigners net buyers of Tokyo stocks for 11th week
* But market players say foreign buying may be peaking
By Antoni Slodkowski
TOKYO, Jan 20 (Reuters) - Japan's Nikkei average fell on Thursday after weaker-than-expected earnings by key U.S. technology and banking firms and strong Chinese growth data prompted investors to lock in profits.
The S&P 500 suffered its biggest decline in nearly two months on Wednesday as Goldman Sachs posted a 53 percent drop in profit on a tumble in trading revenue and Wells Fargo's fourth-quarter profit came below some analysts' estimates.
Sentiment was also soured after data showed China's economy had grown more than expected in the fourth quarter, heightening concerns that China may tighten monetary policy further.
Foreign investors were net buyers of Japanese equities last week for the 11th straight week, with buying at a 9-month high, data showed on Thursday, but market players said the trend could be nearing its end since the Nikkei has gained 14 percent since the start of November.
"A recovery in earnings of Japanese companies has been broadly priced in by investors and once the results are out the market may stop gaining and consolidate around 10,500, but exact moves will depend on the figures and the exchange rate," said Shoji Yoshigoe, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co Ltd.
"The sharp fall in tech shares on Wall Street is prompting investors to take profits on chipmakers that have outperformed the market in recent weeks," said Mitsubishi UFJ Morgan Stanley's Yoshigoe.
Technology shares were the worst performers on Wall Street on poor results from Cree and other LED lighting makers.
In Tokyo, Elpida Memory Inc, the world's third-biggest DRAM maker, lost 1.6 percent to 1,143 yen. Tokyo Electron Ltd fell 3.5 percent to 5,550 yen.
By the midafternoon the benchmark Nikkei was down 1.1 percent or 118.94 points at 10,438.16.
The broader Topix index shed 1 percent to 927.87.
TREND CHANGING
For the first time this year more than 1,000 shares had declined, with 1,284 issues lower and only 245 gaining by midday, indicating market confidence has been dented, brokers said.
Some market participants said the benchmark Nikkei may drop by 200 to 300 points after the earnings season later this month, but its overall performance in February will remain solid due to increased liquidity in global markets after quantitative easing by the U.S. in November.
"Traders won't aggressively buy shares of companies even after fairly strong earnings, and because the market is overheated some drop is to be expected around the beginning of February," said Hideyuki Ishiguro, a supervisor in the investment strategy section of Okasan Securities.
With an improvement in Japanese earnings factored in, the market will be focusing on how well-prepared firms are to sustain an earnings recovery in the long run.
Banking shares fell in heavy trade following Goldman's weaker-than-expected results.
Mitsubishi UFJ Financial Group, Japan's biggest bank by assets, lost 1.3 percent to 454 yen, while Sumitomo Mitsui Financial Group slipped 1.5 percent to 3,005 yen.
Bucking the trend was Daihatsu Motor Co, which rose 0.6 percent to 1,320 yen on a report in industrial daily Nikkan Kogyo Shimbun that the minivehicle unit of Toyota Motor Corp plans to raise its annual output capacity at an Indonesian factory by 50,000 units to 330,000 vehicles around May. (Reporting by Antoni Slodkowski; Editing by Chris Gallagher)