US STOCKS-Materials lift S&P 500 in volatile session, Dow lower

Tue Jan 21, 2014 2:20pm EST

* Dow Chemical jumps on Third Point stake

* Verizon, Travelers and J&J all fall after results

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

* Dow off 0.3 pct, S&P up 0.2 pct, Nasdaq up 0.5 pct

By Ryan Vlastelica

NEW YORK, Jan 21 (Reuters) - U.S. stocks mostly rose on Tuesday, putting the S&P 500 on pace to snap a two-session decline as material stocks rallied, though the Dow fell on disappointing earnings by three of its components.

Trading was volatile, with the S&P fluctuating between positive and negative territory throughout the session, while the Dow moved between modest and solid losses and the Nasdaq swung between modest and strong gains.

The S&P materials index rose 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.

In addition, Alcoa Inc jumped 8.1 percent to $12.28 following an upgrade to "overweight" from JPMorgan. The firm also lifted its price target on the aluminum company to $15 from $9.

Energy stocks, another group with some correlation to the pace of economic growth, also advanced, rising 0.6 percent.

"We still think economically sensitive stocks have room to run... Those have the potential to be long-term winners," said Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management in Boston.

Further market gains were limited as Travelers Cos Inc , Verizon Communications Inc and Johnson & Johnson - all Dow components and bellwethers for their sectors - tumbled following results.

Travelers fell 1.7 percent to $85 after posting a profit that beat expectations, though investors worried about the insurance provider's margins. Verizon lost 1.8 percent to $47.50 while J&J dropped 1.7 percent to $93.40 after it gave an outlook at the low end of analyst expectations.

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.

The Dow Jones industrial average was down 45.64 points, or 0.28 percent, at 16,412.92. The Standard & Poor's 500 Index was up 3.89 points, or 0.21 percent, at 1,842.59. The Nasdaq Composite Index was up 21.59 points, or 0.51 percent, at 4,219.17.

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.

"Results are running light, and negative announcements have been off the hook with very high levels of negative guidance," said Mortimer, who helps oversee about $185 billion in client assets. "The market pays a premium for growth, and the stocks that have rallied and then disappointed are susceptible to large drops almost immediately."

U.S.-listed shares of BlackBery Ltd were the top boost to the Nasdaq 100, jumping 8.5 percent to $9.86 as short-sellers bailed out of the smartphone maker. The stock is up about 33 percent in 2014.

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.

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