By MATT JARZEMSKY

A late-session rally sent blue-chip stocks to a more than five-year high after reports of progress over the debt ceiling. Morgan Stanley (MS) and General Electric (GE) buoyed shares with better-than-expected earnings.

The Dow Jones Industrial Average gained 53.68 points, or 0.4%, to 13649.70, its highest finish since December 2007. The index reversed a drop of as much as 24 points amid news that House Republican leaders are considering a plan to extend the federal borrowing limit for three months.

The Dow industrials edged up as better-than-expected profits offset an unexpected drop in a measure of consumer confidence. WSJ MarketBeat reporter Paul Vigna reports on The News Hub. Photo: Getty Images.

The Standard & Poor's 500-stock index rose 5.04 points, or 0.3%, to 1485.98. The Nasdaq (NDAQ) Composite Index dropped 1.30 points, or less than 0.1%, to 3134.70.

GE jumped 74 cents, or 3.5%, to $22.04, leading the Dow, after the conglomerate reported its quarterly earnings, aided by strength in China and an increase in orders for industrial equipment.

Morgan Stanley climbed 1.63, or 7.9%, to 22.38, after the Wall Street firm reported it swung to a fourth-quarter profit, helped by surging investment-banking and trading revenue.

Each of the S&P 500's 10 sectors rose except the technology group, which was weighed down by Intel (INTC)'s fall of 1.43, or 6.3%, to 21.25. The chip maker reported late Thursday that its fourth-quarter profit fell on weak personal computer demand.

"The macro data drumbeat continues to be reasonably favorable," said Jim Russell, senior equity strategist at U.S. Bank Wealth Management, which oversees $110 billion in assets. "It's kind of a two steps forward, one step back progression."

The S&P 500 and Dow industrials capped their third-straight weekly advance, climbing 0.9% and 1.2%, respectively. Blue chips have climbed 72% over the course of President Barack Obama's first term, which ends Sunday. That marks the biggest rally for a presidential term since a 111% climb during Bill Clinton's first four years in office, which ended in 1997.

The Dow Jones Transportation Average, a benchmark of 20 railroad, airline and shipping companies, rose 0.2%, to an all-time closing high. The Russell 2000 index of small-capitalization stocks added 0.3%, also its highest close ever.

On the economic front, U.S. consumers felt worse about the economy in mid-January than at the end of December, bucking economists' projections for a rebound in sentiment, according to the Thomson Reuters and University of Michigan's consumer-sentiment index.

In Asia, stocks across the region climbed after Chinese data showed the economy expanded 7.9% in the fourth quarter from a year earlier, fueling optimism that the worst may be over for the world's No. 2 economy. China's Shanghai Composite Index added 1.4%.

Japan's Nikkei Stock Average clocked its biggest one-day point and percentage gain since March 2011, climbing 2.9% to its highest closing level since April 2010. A slide in the yen bolstered exporter shares.

European shares were mostly lower, with the Stoxx Europe 600 index down 0.1%. The mining-and-metals sector, sensitive to news of growth out of China, pushed higher. The U.K.'s FTSE 100 index bucked the marginally weaker tone across Europe, up 0.4%. The index, which closed at it highest level since May 2008, rose 0.5% on the week.

Crude-oil prices edged up 0.1%, to $95.56 a barrel, while gold dropped 0.2%, to $1,686.60 a troy ounce. The dollar rose against the euro and yen. The 10-year Treasury note rose in price, pushing its yield down to 1.843%.

In other corporate news, Schlumberger (SLB) rose 3.13, or 4.3%, to 76.50, after reporting earnings that were in line with analyst estimates.

Capital One Financial (COF) tumbled 4.60, or 7.5%, to 56.99, after reporting its quarterly profit and revenue rose less than analysts had expected.

Life Technologies (LIFE), a provider of products and services for medical and research labs, advanced 5.82, or 11%, to 60.79, after saying it had hired advisers to assist in a strategic review. The stock's gain was the biggest among S&P 500 components.

Norwegian Cruise Line Holdings surged 5.79, or 30%, to 24.79, on its first day of trading on the Nasdaq Stock Market. SunCoke Energy Partners (SXCP), a supplier of a raw material used in steelmaking, fell 75 cents, or 3.9%, to 18.25, in its debut. CyrusOne, the data-center business of telecommunications firm Cincinnati Bell (CBB), jumped 2.20, or 12%, to 21.20, in its initial public offering.

Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com