Market rises on data but caution settles on Wall Street

NEW YORK (Reuters) - Stocks edged higher on Friday, with the benchmark S&P index hitting a five-year high after a batch of positive economic reports, but gains were capped as investors grew cautious about a further advance.

Data showing stronger international trade from China and Germany and a report showing a smaller U.S. trade deficit in December were seen as encouraging signs of global demand.

Among stocks on the rise, the technology sector was boosted by gains in LinkedIn Corp and AOL Inc following their quarterly results.

The S&P 500 <.spx>, up 6.3 percent for the year, is on track for six straight weeks of gains. But the index has found it tougher to climb in recent days as investors await strong trading incentives to drive it further upward.

"We are going to have this churn and this consolidation, which actually isn't a bad thing," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.

The market is building a base by consolidating and showing less volatility, he said.

"If it builds a base, from there it is easier to make the argument that you move ahead," Polcari said.

The Dow Jones industrial average <.dji> was up 34.83 points, or 0.25 percent, at 13,978.88. The Standard & Poor's 500 Index <.spx> was up 6.06 points, or 0.40 percent, at 1,515.45. The Nasdaq Composite Index <.ixic> was up 25.90 points, or 0.82 percent, at 3,191.04.

The CBOE Volatility index <.vix>, Wall Street's so-called fear gauge, was down 4.2 percent at 12.94. The gauge generally moves inversely to the S&P 500.

Still, there were concerns whether the market would stride higher.

"I'm watching the 14 level closely. The break below it at the beginning of the year signaled the sharp rally in January, and a rally back above it could be a sign to exercise some caution," said Bryan Sapp, senior trading analyst at Schaeffer's Investment Research.

Healthcare stocks also performed well. The Morgan Stanley healthcare payor index <.hmo> was up 2.3 percent. Molina Healthcare Inc surged 9.7 percent to $31.67 as the biggest boost to the index after posting fourth-quarter earnings.

McDonald's Corp said January sales at established hamburger restaurants around the world fell 1.9 percent, a steeper decline than analysts had expected. Still, shares edged up 0.7 percent to $95.31.

Data showed Chinese exports grew more than expected in January, while imports climbed 28.8 percent, highlighting robust domestic demand, while German data showed a 2012 surplus that was the nation's second highest in more than 60 years, an indication of the underlying strength of Europe's biggest economy.

Another positive sign was U.S. economic data which showed the trade deficit shrank in December to $38.5 billion, its narrowest in nearly three years, indicating the economy did much better in the fourth quarter than initially estimated.

Shares of LinkedIn jumped 18.8 percent to $147.40 after announcing quarterly profits and giving a bullish forecast for the year.

AOL Inc shares also jumped 7 percent to $33.60 after the online company said its quarterly profit had jumped, boosted by a 13 percent rise in advertising sales.

According to Thomson Reuters data through Friday morning, of 339 companies in the S&P 500 that have reported earnings, 69.9 percent have exceeded analysts' expectations, above a 62 percent average since 1994 and 65 percent over the past four quarters.

Fourth-quarter earnings for S&P 500 companies grew 5.2 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.

(Reporting By Angela Moon; Editing by Kenneth Barry)

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