* Dow Chemical jumps on Third Point stake
* Verizon, Travelers, JNJ fall after results
* 70 S&P 500 companies to report earnings this week
* Indexes: Dow off 0.30 pct, S&P up 0.14 pct, Nasdaq up 0.31pct
By Chuck Mikolajczak
NEW YORK, Jan 21 (Reuters) - U.S. stocks edged higher onTuesday, putting the S&P on pace to snap a two-session decline,as gains in the materials sector were offset by declines in atrio of Dow components.
The S&P materials index gained 0.9 percent as the best performing of the 10 major S&P indexes, led by a 4.9percent gain in Dow Chemical to $45.18. Activistinvestor and hedge fund manager Daniel Loeb has taken a stake inthe company and wants it to spin off its petrochemical arm.
"Dow Chemical is kind of behind sort of a broader marketrise with the idea there is still value, or at least onerespected hedge fund thinks there is still some value in aspecific stock," said Rick Meckler, president of investment firmLibertyView Capital Management in Jersey City, New Jersey.
Also adding support to the materials sector was Alcoa Inc, which advanced 4.8 percent to $11.90 after JP Morganupgraded the stock to an "overweight" from a neutral" rating andboosted its price target to $15 from $9 per share.
But three Dow components fell after reporting earnings,giving back advances made before the opening bell.
Travelers Cos Inc lost 2 percent to $84.75 after theinsurance provider posted a more than three-fold rise infourth-quarter profit.
Fellow Dow components Verizon Communications Inc fell1.6 percent to $47.58 and Johnson & Johnson lost 2.2percent to $92.97 as the biggest drag on the S&P 500.
"There is some legitimate concern for investors that goodnews is factored into existing prices. In terms of earnings,this has been a market of 'sell on the news,' because the stockshave run so far, so you really have to surprise on the upside tomaintain gains in some of these stocks," said Meckler.
Verizon said its quarterly revenue rose 3.4 percent,slightly ahead of Wall Street estimates as it added moresubscribers than expected at its Verizon Wireless venture withVodafone Group Plc. JNJ reported quarterly results thatcame in above Wall Street estimates on sharply higher sales ofits prescription drugs and improving sales of its medicaldevices.
The Dow Jones industrial average fell 49.25 points or0.3 percent, to 16,409.31, the S&P 500 gained 2.49 pointsor 0.14 percent, to 1,841.19 and the Nasdaq Composite added 13.006 points or 0.31 percent, to 4,210.588.
IBM is set to report after the closing bell. For theweek, 70 S&P 500 companies are scheduled to report.
According to Thomson Reuters data through Friday, earningsfor the fourth quarter are expected to grow 7 percent over theprior year. Of the 45 companies in the benchmark S&P index thathave reported, 49 percent topped analyst expectations, belowboth the long-term average of 63 percent and the 66 percentaverage over the past four quarters.
As the Federal Reserve has embarked on its plan to reduceeconomic stimulus, investors will closely monitor corporateprofits for signs of growth. About eight companies have issuednegative outlooks for every positive one, which would mark thelowest ratio on record should it continue.
Forest Laboratories Inc gained 1.3 percent to$69.61, pulling back after hitting $71.84, its highest level inalmost ten years. The drugmaker handily beat analysts' estimatesand raised its full-year profit forecast.
Delta Air Lines Inc rose 3.4 percent to $32.14 afterit reported a higher-than-expected fourth-quarter profit, aidedby lower fuel costs.
Vodafone (VOD)