US STOCKS-Housing lifts S&P 500, but Intel and IBM dent the Dow

Last Updated: Wed, Oct 17, 2012 18:10 hrs

* Sept housing starts surge, buoying homebuilders' stocks

* Intel and IBM slump after results, weigh on Dow

* Bank of America shares volatile in heavy trading

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

By Chuck Mikolajczak

NEW YORK, Oct 17 (Reuters) - The S&P 500 rose on Wednesday, putting the benchmark index on track for its third straight day of gains, as U.S. housing starts hit a four-year high, but weak results from tech bellwethers curbed the Dow.

Homebuilders' shares climbed after data showed groundbreaking on new homes jumped 15 percent in September, the quickest pace since July 2008 - in a sign that the housing sector's budding recovery is supporting the broader economy.

But both Intel Corp and International Business Machines Corp tumbled a day after they reported results, keeping the Dow negative. IBM alone caused a drag of nearly 88 points on the blue-chip average. Intel also pulled on the Nasdaq 100 The S&P technology sector index lost 1 percent.

Intel gave a weak fourth-quarter revenue outlook while IBM posted third-quarter revenue that came in under expectations. Intel dropped 3.1 percent to $21.65 while IBM lost 5.8 percent to $198.73. Both were among the biggest drags on the Dow. Intel also weighed on the Nasdaq.

Bank of America shares slipped 0.5 percent to $9.41 after the second-largest U.S. bank said earnings per share were break-even and down sharply from the year-ago period.

Shares of M&T Bank jumped 5 percent to $102.22 after the company posted third-quarter results, helping push the KBW Bank index up 1.1 percent.

Financial companies' earnings have yielded mixed results so far. Earlier this week, results from Citigroup and Goldman Sachs indicated improvement in the financial sector, though those reports followed disappointments from JPMorgan Chase & Co and Wells Fargo.

Earnings "expectations were extremely conservative, and the results are just not that bad at all. And whenever people begin to get too far in one direction - meaning earnings are going to be terrible - generally reality is better than that, and we are seeing that now," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

The Dow Jones industrial average dropped 33.22 points, or 0.25 percent, to 13,518.56. The Standard & Poor's 500 Index gained 2.25 points, or 0.15 percent, to 1,457.17. The Nasdaq Composite Index slipped 4.83 points, or 0.15 percent, to 3,096.34.

After the U.S. Commerce Department's report on housing starts, the PHLX housing index rose 2.5 percent. The index got a lift from P u lteGroup Inc, up 5.4 percent at $17.46.

"They were very good numbers. It does seem to us that the housing market really has bottomed. It's not going to roar higher, but that is a good thing," Ghriskey said.

The S&P 500 achieved its best two-day advance in a month, a rise of 1.8 percent through Tuesday's close, on the heels of last week's drop - its worst weekly decline in four months. Expectations for a disappointing earnings season, which prompted the last week's slide, have been tempered this week as more companies post quarterly results.

According to Thomson Reuters data through Wednesday morning, quarterly earnings for S&P 500 components are now expected to fall 1.7 percent from a year ago. With 14 percent of S&P companies having reported results so far, 64 percent have beaten Wall Street's earnings expectations - less than the 67 percent average for the past four quarters.

Apollo Group Inc shares plummeted 20 percent to $21.99 as the S&P 500's biggest decliner a day after the company, the owner of the largest for-profit college in the United States, gave a weak 2013 outlook.

ASML, the world's leading chip gear maker, agreed to buy Cymer - its key supplier of a light-based technology crucial to making a new generation of much smaller and smarter chips - for $2.5 billion. Cymer surged 46.7 percent to $70.17. In contrast, the U.S.-listed shares of ASML dropped 8.8 percent to $48.87.

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