* Yellen, Fed policymakers: Some U.S. stock valuations 'stretched'
* JPMorgan, Goldman shares rally after earnings
* Fund managers see stocks overvalued, buying anyway -BofA
* Dow up 0.03 pct; S&P 500 down 0.2 pct; Nasdaq off 0.5 pct (Updates with Apple-IBM deal)
By Angela Moon
NEW YORK, July 15 (Reuters) - U.S. stocks pulled back on Tuesday after Federal Reserve Chair Janet Yellen and her fellow Fed policymakers raised concerns about "substantially stretched valuations" in some sectors.
But the major U.S. stock indexes closed well above session lows with the Dow Jones industrial average erasing all of its earlier losses.
In the monetary policy report accompanying her congressional testimony, Yellen said that "equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched."
The Russell 2000 small-cap index dropped 1 percent and the Global X Social Media ETF slid 1.1 percent. Facebook shares tumbled 1.1 percent to $67.17. Twitter Inc shares slid 1.1 percent to $37.88.
"These are the sub-industries that have caused a lot of longtime stock watchers to scratch their heads," said Kim Forrest, senior equity analyst at Fort Pitt Capital Group in Pittsburgh.
"Looking at some of these things and trying to figure out their value, it felt like the 2000 Internet bubble all over again," Forrest added.
The Dow Jones industrial average rose 5.26 points or 0.03 percent, to end at 17,060.68, not far below the record closing high of 17,068.26 set on July 3.
The S&P 500 slipped 3.82 points or 0.19 percent, to 1,973.28, about 12 points below its record closing high of 1,985.44 set on July 3.
The Nasdaq Composite dropped 24.03 points or 0.54 percent, to close at 4,416.39.
According to the BofA Merrill Lynch Fund Manager Survey for July, 61 percent of global asset managers are overweight equities, the highest reading since early 2011, but 21 percent see stock markets as overvalued, the highest reading since 2000.
BlackBerry's U.S.-listed shares plunged 4 percent to $10.85 after the bell following news that International Business Machines Corp will partner exclusively with Apple Inc to sell iPhones and iPads loaded with applications intended to serve corporate clients.
"This deal is a very targeted attempt by Apple with help from IBM to focus on the enterprise corporate market, which has really been the main business of Blackberry," said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York.
After the bell, IBM's stock rose 1.9 percent and Apple shares rose 1.3 percent.
Shares of Yahoo Inc rose 2.7 percent in extended-hours trading after the Internet company reported a decline in second-quarter net revenue.
During the regular session, shares of JPMorgan Chase & Co jumped 3.5 percent to $58.27 and helped lift the Dow. The stock rallied after JPMorgan, the biggest U.S. bank, when ranked by assets, reported a drop in second-quarter profit, although the profit exceeded the average analysts' estimate. The bank also reported a decline in revenue, but the drop was not as steep as JPMorgan had forecast in May.
Shares of Goldman Sachs Group Inc gained 1.3 percent to $169.17 after the company reported a 5 percent increase in second-quarter profit. Higher revenue from stock underwriting helped Goldman's bottom line.
But the stock of Johnson & Johnson, another Dow component, fell 2 percent to $103.28. The diversified healthcare and consumer products company reported higher-than-expected quarterly results on sizzling sales of Olysio, its new treatment for hepatitis C. The company, however, cautioned that the new pill's sales will lose momentum later this year as new rivals come to market.
S&P 500 companies' profits are expected to grow 5.2 percent in the second quarter, according to Thomson Reuters data, down from the 8.4 percent growth forecast at the start of April. Revenue is seen up 3.2 percent.
About 6 billion shares traded on U.S. exchanges, above the 5.32 billion average for the month to date, according to data from BATS Global Markets. (Reporting by Angela Moon; Editing by Jan Paschal)