By Chuck Mikolajczak
NEW YORK (Reuters) - U.S. stocks were flat on Wednesday, as the latest mixed bag of corporate earnings failed to give investors confidence to push equities higher after a strong rally last year.
IBM (NYS:IBM - News) shares lost 3.3 percent to $182.24 and were the biggest drag on both the Dow and S&P 500 indexes. The world's biggest technology services company missed revenue expectations for a fourth straight quarter amid weakening demand, particularly in growth markets like China.
But fellow Dow component United Technologies Corp (NYS:UTX - News) was a bright spot, up 0.9 percent to $116.01 to help curb declines on the blue-chip index. The world's largest maker of elevators and air conditioners reported fourth-quarter profit that topped Wall Street estimates, although revenue fell shy of expectations.
Norfolk Southern Corp (NYS:NSC - News) jumped 6.4 percent to $94.39 as one of the best performers on the S&P 500. The railroad posted a 24 percent rise in quarterly income that beat Wall Street expectations. The gains helped lift the Dow Jones Transportation average to a record high.
Coach Inc (NYS:COH - News) tumbled 6 percent to $49.38, making it the worst performer on the S&P 500 after it said sales in North America fell further in the final quarter of 2013, as it lost share in the handbag business to fast-growing rivals.
"There has been little so far to excite the masses and it is going to lead many to question, can this market hang in there with a flat earnings environment," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.
"It will be easier to unnerve a market with less earnings confidence, and you are seeing companies like IBM and Coach that have come out and leave the investor looking for something substantial to bite into."
The Dow Jones industrial average fell 30.35 points or 0.18 percent, to 16,384.09, the S&P 500 gained 1.05 points or 0.06 percent, to 1,844.85 and the Nasdaq Composite added 9.179 points or 0.22 percent, to 4,234.939.
After a 29.6 percent jump in the S&P 500 in 2013, the S&P has edged down 0.2 percent so far in 2014 as investors look to corporate profits for evidence of growth as the Federal Reserve has begun to wind down its market-friendly economic stimulus.
About eight companies have issued negative outlooks for every positive one, which would mark the lowest ratio on record should it continue.
According to Thomson Reuters data, earnings for the fourth quarter are expected to grow 7.1 percent over the prior year. Of the 65 companies in the benchmark S&P index reporting through Tuesday, about 58 percent topped analyst expectations, below the long-term average of 63 percent. About 71 percent have topped revenue forecasts, above the long-term average of 61 percent.
Advanced Micro Devices Inc (NYS:AMD - News) slumped 10.8 percent to $3.72. The chipmaker forecast a steeper-than-expected fall in current quarter revenue, saying sales of gaming consoles were not growing fast enough to offset slowing PC sales.
After the closing bell, earnings are expected from eBay Inc (NSQ:EBAY - News), Netflix Inc (NSQ:NFLX - News), Varian Medical Systems Inc (NYS:VAR - News) and F5 Networks Inc (NSQ:FFIV - News). A total of 26 S&P 500 companies are scheduled to report earnings on Wednesday.
Merger and acquisition activity continued at a brisk pace, as companies flush with cash look for ways to create growth. Cloud software maker VMWare Inc (NYS:VMW - News) said it would buy privately-held mobile security company AirWatch, in a deal valued at about $1.54 billion, to tap into rising demand for software security, sending its shares up 2.1 percent to $99.37.
Mohamed El-Erian, heir apparent to Pimco co-founder Bill Gross, will step down as chief executive and co-chief investment officer, raising questions about the future course of the world's largest bond fund manager.
(Editing by Bernadette Baum and Nick Zieminski)