* Weak outlook weighs on Intel
* Morgan Stanley up after results
* U.S. Republicans weigh short-term debt limit increase
* Dow up 0.4 pct; S&P up 0.3 pct; Nasdaq down 0.04 pct
By Caroline Valetkevitch
NEW YORK, Jan 18 (Reuters) - The Dow and S&P 500 closed at
five-year highs on Friday as the market registered a third
straight week of gains on a solid start to the quarterly
Morgan Stanley was the latest Wall Street bank to
report strong results. Its better-than-expected earnings
followed similar report cards from Goldman Sachs and JP
Morgan Chase earlier in the week.
Shares of Morgan Stanley shot up 7.9 percent to $22.38. It
reported a fourth-quarter profit after a year-earlier loss,
helped by higher revenue at the bank's institutional securities
But Friday's rise was held back by shares of Intel Corp
, which slumped 6.3 percent to $21.25 a day after it
forecast quarterly revenue below analysts' estimates and
announced plans for increased capital spending amid slow demand
for personal computers.
Another factor that has been weighing on the market before a
three-day weekend is uncertainty about the federal debt limit
and spending cuts that could hamper U.S. growth. U.S. markets
will be closed on Monday for the Martin Luther King Jr. holiday.
There were signs on Friday that the question of raising the
U.S. debt limit would be put off for a while. House Republican
leaders said they would seek to pass a three-month extension of
federal borrowing authority next week to buy time for the
Democratic-controlled Senate to pass a budget that shrinks
"It could be a big positive for the markets if we come up
wih a plan of spending cuts that isn't too awfully hard on the
economy," said Bryant Evans, investment adviser and portfolio
manager at Cozad Asset Management, in Champaign, Illinois.
The Dow Jones industrial average was up 53.68 points,
or 0.39 percent, at 13,649.70. The Standard & Poor's 500 Index
was up 5.04 points, or 0.34 percent, at 1,485.98. The
Nasdaq Composite Index was down 1.30 points, or 0.04
percent, at 3,134.71.
The Dow and S&P 500 ended at their highest levels since
December 2007. For the week, the Dow ended up 1.2 percent, the
S&P 500 ended up 0.9 percent and the Nasdaq ended up 0.3
The CBOE Volatility index, Wall Street's so-called
fear gauge, fell 8.2 percent. The VIX usually moves inversely to
the S&P 500 as it is used as a hedge against further market
Also reporting stronger-than-expected earnings on Friday was
General Electric, whose shares rose 3.5 percent to
Overall, S&P 500 fourth-quarter earnings are forecast to
have risen 2.5 percent, according to Thomson Reuters data.
That estimate is above the 1.9 percent forecast
from a week ago but well below the 9.9 percent fourth-quarter
earnings forecast from Oct. 1, the data showed.
Economic data from China also provided some support to the
market, though the focus remained on U.S. corporate earnings.
China's economy grew at a modestly faster-than-expected 7.9
percent in the fourth quarter, the latest sign the world's
second-biggest economy was pulling out of a post-global
financial crisis slowdown which saw it grow in 2012 at its
weakest pace since 1999.
Despite the gains by Morgan Stanley, financial stocks sagged
as Capital One Financial reported disappointing profit.
Capital One slumped 7.5 percent to $56.99, while the KBW bank
index slipped 0.3 percent.
Volume was roughly 6.6 billion shares traded on the New York
Stock Exchange, the Nasdaq and the NYSE MKT, compared with the
2012 average daily closing volume of about 6.45 billion.
Advancers outpaced decliners on the NYSE by nearly 2 to 1
and on the Nasdaq by about 13 to 11.