* Investors bet on Fed's stimulus measures extending into 2014
* 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 than three months and earnings from Google, Morgan Stanley and others lifting sentiment.
The S&P 500, which rose above Thursday's intraday record of 1732.92 and all-time closing high of 1732.90, was on pace for its third straight day of gains.
In addition to earnings, the market's rise was based on expectations that the Federal Reserve will delay trimming its stimulus measures due to the damage inflicted on the economy by the partial U.S. government shutdown that ended on Thursday.
The market was also relieved that Washington had reached a deal to end the fiscal stalemate.
"Truthfully most of this is the market pricing in the high likelihood that there will be a continuation of monetary policy through the spring," said Jeff Buetow, chief investment officer at Innealta Capital in Austin, Texas, which manages $3 billion in 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-term decisions 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. The Nasdaq Composite Index was up 47.49 points, or 1.23 percent, at 3,910.64.
Google Inc shares were up 13 percent to $1,007.51 a day after the search engine company posted results that beat forecasts. Google, whose stock hit $1,000 for the first time, led the S&P technology sector, up 1.6 percent, to outperform all other sectors.
Health was the only declining sector, down 0.6 percent on predictions from UnitedHealth that the new healthcare law's provision to decrease private Medicare payments could hurt earnings. UnitedHealth shares fell 3.2 percent to $69.08.
Morgan Stanley shares rose 2.5 percent to $29.64 after the company reported a 50 percent rise in quarterly revenue as higher income from equities sales and trading offset a drop in its fixed-income business.
General Electric said its third-quarter profit and revenue fell as its finance business shrunk, but Wall Street looked beyond those numbers to GE's improving profit margins and growing order demand. GE shares rose 4.2 percent to $25.71.
Of the 98 companies in the S&P 500 that have reported so far, 62.2 percent have topped Wall Street expectations, just shy of the 63 percent average since 1994 but below the 66 percent beat rate over the past four quarters, according to Thomson Reuters data through Friday.
On revenue, 53.1 percent of the S&P 500 components have beaten expectations, short of the 61 percent rate since 2002 but above the 49 percent beat rate over the past four quarters.