US STOCKS-Market up after U.S. debt deal, IBM shares hit 2-year low


* IBM, eBay earnings drag down tech

* Goldman Sachs falls after earnings

* Verizon earnings boost lifts telecoms

* Indexes: Dow off 0.4 pct; S&P up 0.3 pct; Nasdaq up 0.25pct

By Julia Edwards

NEW YORK, Oct 17 (Reuters) - U.S. stocks neared record highson Thursday as investors regained confidence in the marketfollowing a last-minute deal to avoid a U.S. default, butweakness in IBM pulled the Dow lower.

The S&P 500 reached 1729.64, just under its record intradayhigh of 1729.86 on Sept. 18. The CBOE Volatility Index, ameasure of investor anxiety, fell to 13.60, its lowest sinceSept. 26, the week before the government shutdown began.

Congress on Wednesday approved an 11th-hour deal to end apartial government shutdown and pull the world's biggest economyback from the edge of default.

"This has been a market with a 'buy the dip' mentality. Ifinvestors are convinced money is going to flow into the marketfor whatever reason, they may not want to miss that run up,"said Quincy Krosby, market strategist for Prudential Financialin Newark.

The Dow, however, fell, pulled down by InternationalBusiness Machines Corp's shares. That stock hit atwo-year low a day after reporting weaker-than-expected revenue,and accounted for 78 points off the Dow Jones industrialaverage. IBM was the biggest decliner on the S&P 500, tradingdown 6.8 percent to $174.04.

The political wrangling has led some investors to believethe U.S. Federal Reserve will have no choice but to leave itsfiscal stimulus measures in place for several more months. Thiscould bolster stocks in coming months.

"We never really had a chance to have a nice rally off theFed's lack of tapering because when we got the news back inSeptember everyone started worrying about the budget situation,"said Paul Zemsky, chief investment officer for multi-assetstrategies for ING Investment Management.

A Reuters survey showed economists have grown lessoptimistic about prospects for the economy as the fight overfiscal policy takes its toll.

The Dow Jones industrial average was down 55.66points, or 0.36 percent, at 15,318.17. The Standard & Poor's 500Index was up 4.70 points, or 0.27 percent, at 1,726.24.The Nasdaq Composite Index was up 9.48 points, or 0.25percent, at 3,848.92.

On a revenue basis, 54.4 percent of companies in the S&P 500have bested Wall Street estimates, below the 61 percent averagesince 2002 but above the 49 percent average for the past fourquarters.

EBay Inc dropped 3.9 percent at $51.46 as thebiggest drag on the Nasdaq 100 index after the companygave a disappointing holiday forecast on Wednesday, saying theU.S. economic environment had deteriorated partly because of thegovernment shutdown.

Goldman Sachs shares fell 2.6 percent to $158 afterthe fifth-largest U.S. bank by assets said its quarterly profitdropped amid weak bond-trading volumes.

Verizon Communications Inc was a bright spot asshares rose 3.3 percent to $48.79 after the company postedstronger-than-expected third-quarter earnings andrevenue.

The number of Americans filing new claims for unemploymentbenefits dropped from a six-month high last week but remainedelevated as California continued to deal with a backlog relatedto computer problems.

The pace of manufacturing growth in the U.S. mid-Atlanticregion slowed slightly in October, but firms' optimism about thefuture hit a 10-year high, the Philadelphia Federal Reserve Banksaid.

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