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* Microsoft gains on upbeat cloud sales forecast
* PayPal, Tesla among top boosts on Nasdaq
* Twitter drops to seven-month low
* 3M drops on lowering profit outlook
* Dow off 0.06%, S&P 500 up 0.26%, Nasdaq up 0.80% (Adds comments, updates market action)
By Shreyashi Sanyal and Arjun Panchadar
Oct 24 (Reuters) - The S&P 500 and Nasdaq indexes rose on Thursday, getting a boost from Microsoft and PayPal's strong earnings, but poor results from 3M pushed the blue-chip Dow Jones index into the red.
The third-quarter earnings season has taken center stage as investors try to gauge the fallout from a drawn out U.S.-China trade war on the domestic economy.
The S&P 500 technology sector traded 1.4% higher, clocking the biggest gain among the 11 major S&P sectors, while the communication services sector fell the most as Twitter Inc tumbled 19% following disappointing quarterly results.
Tech giant Microsoft Corp gained 2% as its outlook for cloud computing services surpassed analysts' expectations, while PayPal Holdings Inc rose 7.3% on a strong full-year earnings forecast.
3M Co, however, fell 4% after the industrial conglomerate lowered its full-year profit forecast on weaker demand.
The earnings narrative so far has been fairly positive with over 80% of the 168 S&P 500 companies that have reported results beating profit expectations, according to Refinitiv data.
"When earnings season began the bar was set pretty low and now a host of companies have reported and beaten expectations ... But I wouldn't say we are completely out of the woods," said Brian Yacktman chief investment officer at YCG Fund in Austin, Texas.
Data on Thursday was mixed as new orders for key U.S.-made capital goods fell more than expected in September, while a private survey showed higher-than-expected factory activity in the month of October.
At 11:35 a.m. ET the Dow Jones Industrial Average was down 16.03 points, or 0.06%, at 26,817.92 and the S&P 500 was up 7.91 points, or 0.26%, at 3,012.43.
The Nasdaq Composite was up 64.86 points, or 0.80%, at 8,184.66.
Lam Research Corp jumped 12%, boosting the Philadelphia Semiconductor Index by 2% after the chip equipment maker forecast strong results for the December quarter.
Dow Inc gained 2.4% after the company exceeded profit estimates, while electric car maker Tesla Inc surged 16% on a surprise quarterly profit.
Other high profile companies including Amazon.com Inc , Intel Corp and Visa Inc are slated to report after markets close on Thursday.
Advancing issues outnumbered decliners by a 1.07-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.05-to-1 ratio on the Nasdaq.
The S&P index recorded 28 new 52-week highs and three new lows, while the Nasdaq recorded 52 new highs and 35 new lows. (Reporting by Shreyashi Sanyal and Arjun Panchadar in Bengaluru; Editing by Bernard Orr and Anil D'Silva)