Wall Street edges higher ahead of Apple results, S&P hits record

(Reuters) - U.S. stocks rose on Monday morning with the S&P touching a new intraday high and the Nasdaq inching closer to its record intraday high ahead of APPLE (AAPL.NQ)s results after the close.

Investors this week will also be closely watching the results of the two-day U.S. Federal Reserve meeting, starting Tuesday, for clues on when interest rates could be hiked.

Data on Monday showed that the U.S. services sector's expansion eased slightly in April from a seven-month high in March on a dip in new business growth.

A slew of recent sub-par indicators have prompted analysts to downgrade their view of the U.S. economic outlook and to push back expectations of when the Fed will increase rates for the first time since June 2006. Most economists now don't see a rate hike until at least the end of the year.

"The reason the markets are reaching these levels is because earnings are coming in much stronger than expected," said Jonathan Golub, chief U.S. market strategist at RBC Capital Markets in New York.

"If you exclude the energy sector, earnings per shares are up about 10 percent for the first quarter. Analysts lowered their expectation way too much."

Of the S&P 500 companies that have reported so far, 70.4 percent have reported earnings above analysts' expectations. In a typical quarter, about 63 percent beat estimates.

The S&P 500 hit a record intraday high of 2,125.92. The Nasdaq hit a high of 5,119.83, the closest it has been to its record of 5,132.52 in March 2000.

Apple shares rose 1.82 percent to $132.66 in late morning trading. Analysts expect Apple's quarterly revenue to rise 23 percent to $56.07 billion, according to Thomson Reuters data.

"Apple is an undervalued growth stock and has been for many, many years," said Adam Sarhan, chief executive of Sarhan Capital in New York.

Apple trades at 14.3 times forward 12-month earnings, while the S&P 500 trades at 16.7 times, according to Thomson Reuters StarMine data.

At 11:33 a.m. EDT (1533 GMT) the Dow Jones industrial average <.DJI> was up 49.88 points, or 0.28 percent, at 18,130.02, the S&P 500 <.SPX> was up 3.6 points, or 0.17 percent, at 2,121.29 and the Nasdaq Composite <.IXIC> was up 8.71 points, or 0.17 percent, at 5,100.80.

Applied Materials slumped 6.8 percent to $20.30 after the chip equipment maker's proposed $10 billion merger with Tokyo Electron <8035.T> was abandoned over U.S. regulatory concerns.

Celladon plunged almost 78.7 percent to $2.90 after the company said its heart failure gene therapy, Mydicar, failed to meet its main goals in an important trial.

Mylan fell 3.7 percent to $73.24 after it rejected Teva Pharmaceutical's unsolicited $40 billion takeover offer, saying it "grossly undervalues" the company. Teva shares lost 1.8 percent.

Advancing issues outnumbered declining ones on the NYSE by 1,813 to 1,106, for a 1.64-to-1 ratio on the upside; on the Nasdaq, 1,368 issues rose and 1,276 fell for a 1.07-to-1 ratio favoring advancers.

(Editing by Savio D'Souza)

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