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US STOCKS-Wall St advances as taper expectations wane; IBM climbs

* Pfizer rises after results, boosting the Dow

* IBM climbs on buyback, dividend announcement

* Retail sales dip in Sept, shutdown weighs on confidence

* Indexes: Dow 0.50 pct, S&P 0.32 pct, Nasdaq flat

By Chuck Mikolajczak

NEW YORK, Oct 29 (Reuters) - U.S. stocks advanced on Tuesday, as soft economic data supported expectations the U.S. Federal Reserve will keep its stimulus measures intact for several months, while gains in Pfizer and IBM helped the Dow.

Economic data showed consumer spending rose in September, but auto sales fell, indicating sluggish economic growth in the third quarter. Other data showed consumer confidence fell sharply in October as a result of the partial government shutdown while producer prices unexpectedly fell in September, pointing to muted inflation.

"The Fed surprised me by not tapering in September and the key reason they cited was the fact inflation is running very moderately, and they still have lots of room on the inflation front," said Doug Foreman, co-chief investment officer at Kayne Anderson Rudnick Investment Management in Los Angeles.

"Certainly the data today didn't give them anything different to think about that."

The Fed begins a two-day policy meeting on Tuesday, with officials unlikely to make any shift to monetary policy this week as they wait for more evidence of how badly Washington's budget battle has hurt the U.S. economy.

The housing market was a bright spot, as home prices rose 0.9 percent in August, more than had been expected, according to the S&P/Case Shiller index.

The Dow Jones industrial average rose 77.22 points or 0.5 percent, to 15,646.15, the S&P 500 gained 5.61 points or 0.32 percent, to 1,767.72 and the Nasdaq Composite dropped 0.112 points or 0 percent, to 3,940.017.

Equities have rallied as expectations for when the Fed will begin to trim its $85 billion monthly bond-buying program have been pushed further out. The S&P 500 is on track for its ninth gain in the past 10 sessions, rising over 4 percent during that span.

Pfizer Inc rose 1.6 percent to $31.23 to help lift the Dow and S&P after the pharmaceutical company better-than-expected third-quarter earnings.

Apple weighed on the Nasdaq after the iPad maker's results late Monday disappointed some investors. Shares rose as much as 1.8 percent in early trading but were last down 0.9 percent to $524.50.

IBM Corp was the top boost to both the Dow and the S&P 500, hitting a session high of $181 after the company announced its quarterly dividend and authorized a $15 billion stock buyback. Shares were recently up 1.8 percent to $180.51.

Cummins Inc slumped 8.5 percent to $122.30 as the worst performer on the S&P 500 after the maker of engines and other vehicle components, reported lower-than-expected quarterly profit on Tuesday and cut its full-year outlook.

According to Thomson Reuters data though Tuesday morning, of the 281 companies in the S&P 500 companies that have posted earnings, 68.7 percent have topped profit expectations, above both the long-term average of 63 percent and the 66 percent beat rate over the past four quarters.

However, only 52.5 percent have beaten revenue estimates, below the 61 percent rate since 2002 and slightly above the 49 percent rate over the past four quarters.

Michael Kors rose 1 percent to $77.17 after Standard & Poor's said the company would be added to the S&P 500 as of Nov. 1, replacing NYSE Euronext.