S&P edges higher but IBM results drag Dow

NEW YORK (Reuters) - U.S. stocks were mixed on Monday, with the S&P 500 and Nasdaq posting modest gains, but the Dow falling as quarterly results from IBM (IBM.NY)disappointed.

IBM shares slumped 7.3 percent to $168.69 as the biggest drag on both the Dow and S&P 500 after the company's third-quarter earnings fell well short of Wall Street expectations. IBM had earlier said it would pay Globalfoundries $1.5 billion in cash over the next three years to take its loss-making semiconductor unit.

IBM's weakness produced an outsized drop in the Dow Jones Industrial Average , accounting for over 80 points to the downside for the price-weighted index.

The weak IBM results helped spur speculation the Federal Reserve may be reluctant to end its massive bond-buying stimulus program this month.

"On a number like that, with the forecast they gave you would expect the broader market would come under more pressure, and maybe it will," said Ken Polcari, Director of the NYSE floor division at O?Neil Securities in New York.

"But what it is telling you is, based on IBM?s report, that the odds are lining up we may hear some more dovish comments out of the Fed next week than not."

At 9:43 a.m., the Dow Jones industrial average fell 67.84 points, or 0.41 percent, to 16,312.57, the S&P 500 gained 2.33 points, or 0.12 percent, to 1,889.09 and the Nasdaq Composite added 14.61 points, or 0.34 percent, to 4,273.05.

Earnings season will ramp up significantly this week, with nearly 130 S&P 500 companies scheduled to report, include Apple Inc after the close on Monday.

According to Thomson Reuters data through Friday, of 81 companies in the S&P 500 that have reported quarterly earnings, 64 percent beat analyst expectations, slightly above the 63 percent average since 1994 but below the 67 percent rate for the past four quarters.

Third-quarter earnings are expected to grow 6.9 percent from a year ago, on revenue growth of 3.8 percent.

The largest percentage gainer on the S&P 500 was Tesoro Corp , which rose 7.5 percent, while the largest percentage decliner was IBM.

The largest percentage gainer on the Nasdaq 100 was SANDISK , which was rising 3.0 percent, while the largest percentage decliner was NetApp , down 1.8 percent.

Among the most active stocks on the NYSE were Bank Of America , up 0.40 percent to $16.28; Alcatel-Lucent , down 0.83 percent to $2.38 and Pfizer , down 0.40 percent to $27.72.

On the Nasdaq, Apple , up 1.1 percent to $98.73 and Facebook , up 0.6 percent to $76.41 were among the most actively traded.

Advancing issues were outnumbering declining ones on the NYSE by 1,887 to 867, for a 2.18-to-1 ratio on the upside; on the Nasdaq, 1,415 issues were rising and 826 falling for a 1.71-to-1 ratio favoring advancers.

The benchmark S&P 500 index was posting 1 new 52-week highs and 2 new lows; the Nasdaq Composite was recording 7 new highs and 10 new lows.

(Editing by Bernadette Baum)