* UPS falls as higher costs hurt profit
* Facebook higher after forecasting rising ad sales
* Apple, Alphabet, Amazon to report after the bell
* Dow down 0.19 pct, S&P off 0.09 pct, Nasdaq up 0.11 pct (Adds details, changes comment, updates prices)
By Tanya Agrawal
Feb 1 (Reuters) - U.S. stocks were lower in late morning trading on Thursday, following a string of lackluster earnings and after the Federal Reserve raised its inflation outlook for the year.
Although the Fed kept rates unchanged, it struck a more hawkish tone than expected, no longer saying it expected price growth to stay below 2 percent.
Equity markets are torn between buoyant economic growth and double-digit company earnings, on the one hand, and the possibility that U.S. and euro zone central banks will tighten policy faster than expected, which is pushing up bond yields.
"There are concerns that rates are moving up and inflation is firming," said Jeff Zipper, managing director for investments at Private Client Reserve at U.S. Bank.
"If inflation moves higher then the chances of a fourth rate hike go up. The market is a lot more jittery and is dissecting every piece of economic data more closely."
Currently the market has priced in three rate hikes for 2018.
A report showed weekly jobless claims unexpectedly fell, pointing to a tight labor market and strong economy.
However, nonfarm productivity fell 0.1 percent in the fourth quarter, which was the first drop since the first quarter of 2016, while unit labor costs rose 2.0 percent in the final three months of 2017. Higher labor costs could signal faster inflation than is currently anticipated.
Another report showed U.S. factory activity slowed in January amid a fall in new orders.
At 10:44 a.m. ET (1544 GMT), the Dow Jones Industrial Average was down 50.26 points, or 0.19 percent, at 26,099.13, the S&P 500 was down 2.77 points, or 0.09 percent, at 2,821.04.
The Nasdaq Composite was up 7.84 points, or 0.11 percent, at 7,419.32.
Eight of the 11 major S&P indexes were lower, with the materials index's 1.21 percent fall leading the decliners.
Strong fourth-quarter reports from S&P 500 companies so far have pushed up analysts' profit growth estimate to 13.7 percent, from 12 percent at the start of the month.
However, expectations from earnings have gone up and companies that don't do well are being punished more harshly, Zipper said.
UPS dropped 6.6 percent after the world's largest package delivery company reported a fourth-quarter net profit that was hurt by additional costs.
Cigna, Alibaba, DowDuPont were all lower after reporting quarterly results.
PayPal fell 7.2 percent after former parent eBay said it planned to move to a new primary payment processor.
Facebook rose 3.5 percent after the company forecast rising ad sales, despite a dip in usage on the social media network.
Industry heavyweights Apple, Alphabet and Amazon are due to report results after the bell.
Declining issues outnumbered advancers on the NYSE by 1,636 to 1,138. On the Nasdaq, 1,565 issues fell and 1,153 advanced.
The S&P 500 index showed 19 new 52-week highs and 4 new lows, while the Nasdaq recorded 45 new highs and 44 new lows. (Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza and Anil D'Silva)