US STOCKS-Dow and S&P drop on bank worries, Apple jumps late

                                
 * Morgan Stanley weighs on financials
                                
 * Caterpillar rises after upgrade
                                
 * Boeing gives full-year outlook, range above estimates
                                
 * Dow off 1 pct, S&P off 0.8 pct, Nasdaq up 0.1 pct
                                
 * For up-to-the-minute market news click [STXNEWS/US]
 (Adds Apple and eBay earnings plus Qualcomm's outlook after
the bell, updates Nasdaq's volume)
                                
 By Chuck Mikolajczak
                                
 NEW YORK, April 22 (Reuters) - The Dow and S&P fell on
Wednesday after Morgan Stanley revived concerns about the
banking sector and the wider economy after it posted its
second straight quarterly loss and slashed its dividend.
                                
 The Nasdaq, however, eked out a gain after AT&T <T.N>
reported a profit that fell less than expected, and an analyst
said its iPhone partnership with Apple Inc <AAPL.O> is
starting to help rather than hurt profits, lifting tech
shares. [ID:nN22461975].
                                
 The market, which had been up much of the day as investors
initially seized on company comments suggesting that corporate
profits were stabilizing, has been sensitive to the outlook
for banks ahead of the government's "stress test" results
expected in the days ahead.
                                
 Morgan Stanley <MS.N> slid 9 percent to $22.44 after it
posted its third loss in six quarters on real estate losses
and a charge wiped out fees and trading profits. The KBW Bank
Index <.BKX> fell 4.9 percent.
                                
 Banks have been a key component in leading the six-week
rally that drove the broad S&P 500 up nearly 25 percent from
March's bear market lows.
                                
 "The financial sector is still heavily influencing the
tone and direction of this market," said Keith Wirtz,
president and chief investment officer of Fifth Third Asset
Management in Cincinnati.
                                
 "Equities are just captive to anything that is coming out
of financials and today, it was about Morgan Stanley."
                                
 The Dow Jones industrial average <.DJI> dropped 82.99
points, or 1.04 percent, to 7,886.57. The Standard & Poor's
500 Index <.SPX> slid 6.53 points, or 0.77 percent, to 843.55.
The Nasdaq Composite Index <.IXIC> gained 2.27 points, or 0.14
percent, to 1,646.12.
                                
 Before the sell-off in the last hour, the stock indexes
had been driven higher by brighter outlooks from companies
reporting quarterly results.
                                
 JPMorgan recommended that Caterpillar should make up a
larger part of investors' portfolios, and Caterpillar's stock
rose 3.4 percent to $32.45, making it the Dow's biggest
advancer. (For details, see [ID:nBNG366642])
                                
 AT&T <T.N> was up 1.8 percent at $25.74 after profit fell
less than expected, and an analyst said its iPhone partnership
with Apple Inc <AAPL.O> is starting to help rather than hurt
profits. [ID:nN22461975]
                                
 APPLE AND eBAY CLIMB AFTER THE BELL
                                
 After the closing bell, iPhone and iPod maker Apple
<AAPL.O> posted stronger-than-expected quarterly results and
gave a typically conservative outlook for the current quarter,
sending shares up 2.4 percent to $124.40. [ID:nN21504807]
                                
 Shares of EBay Inc <EBAY.O> rose 6.2 percent to $15.70 in
extended trade after the online auctioneer reported lower
quarterly net profit, sales and profit margins, but results
beat Wall Street expectations. [ID:nN21486387]
                                
 Wireless chip maker Qualcomm <QCOM.O> said that it was
rescheduling its quarterly results due to advanced settlement
discussions with Broadcom <BRCM.O> over legal disputes, but it
also said second-quarter revenue and operating income met or
exceeded prior guidance. [ID:nN22249153]
                                
 Qualcomm's stock rose 7.4 percent to $24.28 in
extended-hours trading.
                                
 FOR NASDAQ, IT'S THE BALM OF GILEAD
                                
 During the regular session, Gilead Sciences Inc <GILD.O>
jumped 5.7 percent to $46.22 and contributed the most to the
Nasdaq's gain after its quarterly profit beat estimates on
increased sales of its drugs to treat the virus that causes
AIDS.
                                
 Semiconductor stocks were a bright spot following strong
quarterly results from SanDisk Corp <SNDK.O>. [ID:nN21451107].
The PHLX Semiconductor index <.SOXX> advanced 4.3 percent.
                                
 Boeing Co <BA.N> rose 1.8 percent to $37.30 after the big
U.S. aircraft maker and defense contractor lowered its
full-year outlook, but the range was still above Wall Street's
expectations, according to Reuters Estimates.
[ID:nN21472694].
                                
 Trading was active on the New York Stock Exchange, with
about 1.77 billion shares changing hands, above last year's
estimated daily average of 1.49 billion, while on Nasdaq,
about 2.69 billion shares traded, above last year's daily
average of 2.28 billion.
                                
 Advancing stocks outnumbered declining ones on the NYSE by
a ratio of about 8 to 7, while on the Nasdaq, 14 stocks rose
for every 13 that fell.
 (Additional reporting by Jennifer Ablan; Editing by Jan
Paschal)