U.S. shares edge higher; oil pares gains after Iran ship seizure

By Sam Forgione

NEW YORK (Reuters) - U.S. shares rebounded in afternoon trading on Tuesday, boosted by strong earnings from Merck and a dividend hike by IBM, while oil prices pared gains on expectations that U.S. crude stockpiles have reached record highs.

Merck shares jumped 5.2 percent after the U.S. drugmaker beat quarterly earnings estimates. IBM shares rose 1.8 percent, the biggest positive influence on the Dow, after the company hiked its quarterly dividend by 18 percent.

Data showing U.S. single-family home prices rose more than expected in February contributed to the afternoon rebound, although the data was released earlier in the session when some weak corporate results depressed U.S. shares.

"So far, the first quarter earnings have surpassed expectations and the housing numbers came in strong," said John Augustine, chief investment officer at Huntington Bank in Columbus, Ohio, which oversees more than $12.6 billion in assets. "So anytime you have any good economic data, the markets react positively."

Disappointing corporate earnings handed European shares their biggest daily decline in over a week, however, with paper maker UPM-Kymmene slipping after results while a new share issue hit Commerzbank .

Oil prices seesawed as traders weighed security scares in the Middle East and support from a weak dollar against expectations that U.S. crude stockpiles have reached record highs. Iranian forces boarded a Marshall Islands-flagged cargo ship in the Gulf on Tuesday, the Pentagon said, an event which spurred earlier gains in oil prices.

Brent crude was last down 8 cents at $64.75 a barrel. U.S. crude was last up 7 cents at $57.06 per barrel.

The start of the Federal Reserve's two-day policy meeting injected some caution into markets. Analysts expect recent soft U.S. data will nudge the U.S. central bank towards a dovish monetary policy.

The dollar index , which measures the greenback against a basket of major currencies, fell to an eight-week low of 96.011 after an unexpectedly weak U.S. consumer confidence report for April.

"The current period of dollar weakness appears to be gaining momentum and accordingly likely has further to run," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.

The Dow Jones industrial average was last up 50.58 points, or 0.28 percent, at 18,088.55. The S&P 500 was up 4.17 points, or 0.2 percent, at 2,113.09. The Nasdaq Composite was up 0.46 points, or 0.01 percent, at 5,060.71.

MSCI's all-country world stock index , which tracks shares in 45 nations, was last up 0.39 points or 0.09 percent, at 442.56.

Europe's broad FTSEurofirst 300 index closed down 1.49 percent at 1,618.26.

Safe-haven U.S. Treasury yields rose after the stronger-than-expected data on the U.S. housing sector. Benchmark 10-year U.S. Treasury notes were last down 17/32 in price to yield 1.98 percent, from a yield of 1.92 percent late Monday.

Spot gold prices rose $12.05 or 1.00 percent, to $1,213.60 an ounce.

(Reporting by Sam Forgione; Additional reporting by Marc Jonesin London, Tanya Agrawal in Bengaluru and Gertrude Chavez-Dreyfuss and Barani Krishnan in New York; Editing by Nick Zieminski)