* Investors bet on Fed's stimulus measures extending into2014
* Morgan Stanley earnings, revenue beat expectations
* Health sector sags on predicted cuts to Medicare
* Indexes up: Dow 0.2 pct, S&P up 0.7 pct, Nasdaq 1.2 pct
By Julia Edwards
NEW YORK, Oct 18 (Reuters) - U.S. stocks rose on Friday,with the S&P 500 index heading for its best week in more thanthree months and earnings from Google, Morgan Stanley and otherslifting sentiment.
The S&P 500, which rose above Thursday's intraday record of1732.92 and all-time closing high of 1732.90, was on pace forits third straight day of gains.
In addition to earnings, the market's rise was based onexpectations that the Federal Reserve will delay trimming itsstimulus measures due to the damage inflicted on the economy bythe partial U.S. government shutdown that ended on Thursday.
The market was also relieved that Washington had reached adeal to end the fiscal stalemate.
"Truthfully most of this is the market pricing in the highlikelihood that there will be a continuation of monetary policythrough the spring," said Jeff Buetow, chief investment officerat Innealta Capital in Austin, Texas, which manages $3 billionin assets.
"With the insanity that took place over the past few weeks,I think the Fed is probably going to put some of the long-termdecisions on hold," Buetow said.
The Dow Jones industrial average was up 26.01 points,or 0.17 percent, at 15,397.66. The Standard & Poor's 500 Index was up 11.26 points, or 0.65 percent, at 1,744.41. TheNasdaq Composite Index was up 47.49 points, or 1.23percent, at 3,910.64.
Google Inc shares were up 13 percent to $1,007.51 aday after the search engine company posted results that beatforecasts. Google, whose stock hit $1,000 for the first time,led the S&P technology sector, up 1.6 percent, to outperform allother sectors.
Health was the only declining sector, down 0.6 percent onpredictions from UnitedHealth that the new healthcarelaw's provision to decrease private Medicare payments could hurtearnings. UnitedHealth shares fell 3.2 percentto $69.08.
Morgan Stanley shares rose 2.5 percent to $29.64after the company reported a 50 percent rise in quarterlyrevenue as higher income from equities sales and trading offseta drop in its fixed-income business.
General Electric said its third-quarter profit andrevenue fell as its finance business shrunk, but Wall Streetlooked beyond those numbers to GE's improving profit margins andgrowing order demand. GE shares rose 4.2 percent to $25.71.
Of the 98 companies in the S&P 500 that have reported sofar, 62.2 percent have topped Wall Street expectations, just shyof the 63 percent average since 1994 but below the 66 percentbeat rate over the past four quarters, according to ThomsonReuters data through Friday.
On revenue, 53.1 percent of the S&P 500 components havebeaten expectations, short of the 61 percent rate since 2002 butabove the 49 percent beat rate over the past four quarters.
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