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* Pence takes aim at China in wide-ranging critique
* Microsoft gains on upbeat cloud sales forecast
* PayPal, Tesla among top boosts on Nasdaq
* 3M drops on lowering profit outlook
* Dow off 0.14%, S&P 500 up 0.14%, Nasdaq up 0.70% (Updates to early afternoon)
By Shreyashi Sanyal and Arjun Panchadar
Oct 24 (Reuters) - The S&P 500 and Nasdaq index rose on Thursday, boosted by gains in Microsoft and PayPal, but Vice President Mike Pence's comments on China rekindled worries ahead of trade talks.
Pence accused China of curtailing "rights and liberties" in Hong Kong in a wide-ranging critique of Beijing's behavior but also insisted that the United States does not seek confrontation or to "de-couple" from its main economic rival.
Still, the third-quarter earnings season took center stage as investors tried to gauge the fallout from the U.S.-China tariff war on the domestic economy.
Tech giant Microsoft Corp gained 2.3% as its outlook for cloud computing services surpassed analysts' expectations, while PayPal Holdings Inc rose 8% on a strong full-year earnings forecast.
But the blue-chip Dow Jones index was in the red, dragged down by a 4.2% fall in shares of 3M Co after the industrial conglomerate lowered its full-year profit forecast.
The S&P 500 technology sector traded 1.5% higher, clocking the biggest gain among the 11 major S&P sectors, while the communication services sector slipped as Twitter Inc tumbled about 20% following disappointing quarterly results.
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 12:55 p.m. ET the Dow Jones Industrial Average was down 37.53 points, or 0.14%, at 26,796.42, the S&P 500 was up 4.14 points, or 0.14%, at 3,008.66.
The Nasdaq Composite was up 56.96 points, or 0.70%, at 8,176.75.
Lam Research Corp jumped 11.3%, providing the biggest boost to the Philadelphia Semiconductor Index, which rose 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 16.7% 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.
Declining issues outnumbered advancers for a 1.16-to-1 ratio on the NYSE and for a 1.34-to-1 ratio on the Nasdaq.
The S&P index recorded 28 new 52-week highs and three new lows, while the Nasdaq recorded 53 new highs and 39 new lows. (Reporting by Shreyashi Sanyal and Arjun Panchadar in Bengaluru; Editing by Bernard Orr and Anil D'Silva)