* Morgan Stanley rises as profit surges
* IBM drops on bigger-than-expected revenue decline
* U.S. economy shows only modest signs of inflation pressure -Fed
* Dow down 0.39 pct, S&P off 0.01 pct, Nasdaq up 0.39 pct (Updates to mid-afternoon, changes byline)
By Chuck Mikolajczak
NEW YORK, April 19 (Reuters) - The S&P 500 was flat on Wednesday as investors waded through the latest round of earnings, while a drop in oil prices weighed on the energy sector.
IBM sank 4.7 percent to $162.09 after the company reported a bigger-than-expected decline in revenue for the first time in five quarters. The stock was the biggest drag on the S&P and the price-weighted Dow.
The energy sector slumped 1.2 percent as oil prices fell more than 4 percent after U.S. data showed a counter-seasonal build in gasoline inventories and a smaller-than-expected decline in overall crude stocks. U.S. crude fell below $52 a barrel for the first time in two weeks.
"Crude broke $52 on WTI, that is the strongest correlation we have right now away from the case-by-case earnings we have," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
"Except for a couple of household names, (earnings) have been good. The problem with our impression of the earnings season is we just talk about the bad news."
Morgan Stanley, rose 2.9 percent after posting a surge in quarterly profit, taking some of the sting out of a disappointing report from Goldman Sachs on Tuesday.
Of the 57 companies in the S&P 500 that have reported earnings through Wednesday morning, 75.4 percent have topped expectations, according to Thomson Reuters data, above the 71 percent average for the past four quarters.
Overall profits of S&P 500 companies are estimated to have risen 10.8 percent in the quarter - the best since 2011.
The Dow Jones Industrial Average fell 80.16 points, or 0.39 percent, to 20,443.12, the S&P 500 lost 0.16 points, or 0.01 percent, to 2,342.03 and the Nasdaq Composite added 23.06 points, or 0.39 percent, to 5,872.53.
With Wall Street near record levels and worries over President Donald Trump's ability to carry out his pro-growth promises, investors are hoping first-quarter earnings will be strong enough to justify pricey market valuations.
Mounting tension between North Korea and the United States, along with political uncertainty in Europe ahead of the French presidential elections, have also served to keep investors cautious.
Intuitive Surgical up 7.1 percent at $813.51 after the company reported higher-than-expected first-quarter revenue and profit. The stock was on track for its best day in nearly two years.
American Express, eBay and Qualcomm are scheduled to report results after the market closes.
The U.S. economy expanded at a modest-to-moderate pace between mid-February and the end of March, but inflation pressures remained in check despite more difficulties in attracting and retaining workers, the Federal Reserve said.
Advancing issues outnumbered declining ones on the NYSE by a 1.16-to-1 ratio; on Nasdaq, a 1.83-to-1 ratio favored advancers.
The S&P 500 posted 20 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 78 new highs and 29 new lows. (Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)