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US STOCKS-Wall St inches up after two-day dip; materials climb

Chuck Mikolajczak
Tuesday, 21 Jan 2014 | 10:43 AM ET

* Dow Chemical jumps on Third Point stake

* Verizon, Travelers, JNJ fall after results

* 70 S&P 500 companies to report earnings this week

* Indexes: Dow off 0.30 pct, S&P up 0.14 pct, Nasdaq up 0.31 pct

NEW YORK, Jan 21 (Reuters) - U.S. stocks edged higher on Tuesday, putting the S&P on pace to snap a two-session decline, as gains in the materials sector were offset by declines in a trio of Dow components.

The S&P materials index gained 0.9 percent as the best performing of the 10 major S&P indexes, led by a 4.9 percent gain in Dow Chemical to $45.18. Activist investor and hedge fund manager Daniel Loeb has taken a stake in the company and wants it to spin off its petrochemical arm.

"Dow Chemical is kind of behind sort of a broader market rise with the idea there is still value, or at least one respected hedge fund thinks there is still some value in a specific stock," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

Also adding support to the materials sector was Alcoa Inc , which advanced 4.8 percent to $11.90 after JP Morgan upgraded the stock to an "overweight" from a neutral" rating and boosted its price target to $15 from $9 per share.

But three Dow components fell after reporting earnings, giving back advances made before the opening bell.

Travelers Cos Inc lost 2 percent to $84.75 after the insurance provider posted a more than three-fold rise in fourth-quarter profit.

Fellow Dow components Verizon Communications Inc fell 1.6 percent to $47.58 and Johnson & Johnson lost 2.2 percent to $92.97 as the biggest drag on the S&P 500.

"There is some legitimate concern for investors that good news is factored into existing prices. In terms of earnings, this has been a market of 'sell on the news,' because the stocks have run so far, so you really have to surprise on the upside to maintain gains in some of these stocks," said Meckler.

Verizon said its quarterly revenue rose 3.4 percent, slightly ahead of Wall Street estimates as it added more subscribers than expected at its Verizon Wireless venture with Vodafone Group Plc. JNJ reported quarterly results that came in above Wall Street estimates on sharply higher sales of its prescription drugs and improving sales of its medical devices.

The Dow Jones industrial average fell 49.25 points or 0.3 percent, to 16,409.31, the S&P 500 gained 2.49 points or 0.14 percent, to 1,841.19 and the Nasdaq Composite added 13.006 points or 0.31 percent, to 4,210.588.

IBM is set to report after the closing bell. For the week, 70 S&P 500 companies are scheduled to report.

According to Thomson Reuters data through Friday, earnings for the fourth quarter are expected to grow 7 percent over the prior year. Of the 45 companies in the benchmark S&P index that have reported, 49 percent topped analyst expectations, below both the long-term average of 63 percent and the 66 percent average over the past four quarters.

As the Federal Reserve has embarked on its plan to reduce economic stimulus, investors will closely monitor corporate profits for signs of growth. About eight companies have issued negative outlooks for every positive one, which would mark the lowest ratio on record should it continue.

Forest Laboratories Inc gained 1.3 percent to $69.61, pulling back after hitting $71.84, its highest level in almost ten years. The drugmaker handily beat analysts' estimates and raised its full-year profit forecast.

Delta Air Lines Inc rose 3.4 percent to $32.14 after it reported a higher-than-expected fourth-quarter profit, aided by lower fuel costs.