US STOCKS-S&P and Nasdaq end higher as deal news helps

* Morgan Stanley downgrades semis, Intel falls * Berkshire bid for Burlington Northern boosts industrials * Dow off 0.2 pct, S&P up 0.2 pct, Nasdaq up 0.4 pct * For up-to-the-minute market news, click [STXNEWS/US] (Updates to close)

By Caroline Valetkevitch

NEW YORK, Nov 3 (Reuters) - The S&P 500 and Nasdaq rose slightly on Tuesday as deal news bolstered views that improved merger activity could signal economic strength. But the Dow edged lower after a downgrade of the tech sector.

Limiting gains was Morgan Stanley's downgrade of semiconductors, which weighed on the sector.

Trading was choppy, with indexes swinging between gains and losses.

The Dow Jones Transportation Average rose 5.3 percent as Warren Buffett's Berkshire Hathaway (BRKa.N: Quote, Profile, Research) agreed to buy Burlington Northern Santa Fe Corp (BNI.N: Quote, Profile, Research) in a deal that values the railraod company at $34 billion. Burlington shares jumped 27.5 percent to $97.

Higher oil prices helped lift the S&P 500, with the S&P energy sector index up 1.1 percent.

Technology stocks ranked among the major decliners after Morgan Stanley downgraded the sector to "cautious" from "attractive," and cut its view on Dow component Intel Corp (INTC.O: Quote, Profile, Research), saying inventories were beginning to creep up in the sector. The PHLX semiconductor index lost 1.3 percent. [ID:nBNG421836]

"One of the themes we've been pointing toward is that the next catalyst after earnings is M&A activity, and we've had some big ones," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut. "People consider companies to be cheap."