* AT&T, Time Warner fall after deal announcement
* B/E Aerospace jumps after Rockwell Collins bid
* Q3 earnings seen up 1.1 pct after four contraction quarters
* Indexes up: Dow 0.4 pct, S&P 0.4 pct, Nasdaq 0.85 pct (Updates throughout, changes byline)
By Rodrigo Campos
NEW YORK - Oct 24 (Reuters) - The S&P 500 hit a two-week high on Monday on the back of strong earnings, while a flurry of acquisitions indicated corporate America continues to see untapped value in the market.
Annualized third-quarter earnings from S&P 500 components are expected to have risen 1.1 percent last quarter, following four quarters of contraction, according to Thomson Reuters I/B/E/S data. Of the 120 companies that have reported so far, 78 percent have beaten analyst expectations, above the long-term average of 63.5 percent.
Microsoft, which handily beat expectations last week, rose 2 percent and Apple, due to report on Tuesday, rose 0.7 percent.
"Consensus is earnings are going to continue to improve in part due to favorable energy prices and to strong consumption patterns here in the U.S.," said Chad Morganlander, portfolio manager at Stifel Nicolaus in Florham Park, New Jersey.
Wall Street signaled skepticism that regulators would allow AT&T to purchase Time Warner Inc for a planned $85.4 billion.
Shares of both companies fell as analysts scrutinized the deal, with AT&T down 1.8 percent at $36.81 and Time Warner Inc down 3.0 percent at $86.82.
But competitor T-Mobile US jumped to its highest since August 2007 after it raised its forecast for customer additions for the year and said the AT&T-Time Warner deal could help T-Mobile carve out more market share.
T-Mobile shares were last up 9.5 percent at $51.20.
The Dow Jones industrial average rose 72.6 points, or 0.4 percent, to 18,218.31, the S&P 500 gained 8.56 points, or 0.4 percent, to 2,149.72 and the Nasdaq Composite added 44.72 points, or 0.85 percent, to 5,302.12.
TD Ameritrade fell 3.6 percent to $35.76 after it said it would buy privately held Scottrade Financial Services in a deal valued at $4 billion.
B/E Aerospace jumped 16.1 percent to $58.77 after aircraft component maker Rockwell Collins said it would buy the company in a deal valued at $6.4 billion plus the assumption of $1.9 billion in debt. Rockwell was down 6.2 percent at $79.25.
"Overall merger and acquisition activity will continue, due in part to low debt financing costs," said Stifel's Morganlander.
Advancing issues outnumbered declining ones on the NYSE by a 1.39-to-1 ratio; on Nasdaq, a 1.44-to-1 ratio favored advancers.
The S&P 500 posted 18 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 105 new highs and 41 new lows. (Reporting by Rodrigo Campos; Editing by Nick Zieminski)