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* S&P 500 poised to rally for an eighth straight day
* New home sales fall in December
* Procter & Gamble profit improves
* Dow up 0.2 pct, S&P 500 up 0.2 pct, Nasdaq up 0.4 pct
By Chuck Mikolajczak
NEW YORK, Jan 25 (Reuters) - U.S. stocks advanced on Friday as Procter & Gamble's earnings offset softer-than-expected housing numbers and kept the Standard & Poor's 500 Index on track for its longest winning streak in more than eight years.
Procter & Gamble shares rose 3.7 percent to $73.04 and gave the biggest boost to both the Dow and S&P 500 after the world's top household products maker's quarterly profit soared past expectations. The company also raised its sales and earnings outlook for the fiscal year.
But the stock market's gains were curbed after economic data showed new U.S. single-family home sales fell in December, although expectations for a continued housing sector recovery remain intact. The PHLX housing sector index slipped 0.2 percent.
The benchmark S&P 500 index is up 5 percent so far in January. The equity market's strong start this year has been attributed to solid corporate results, an agreement in Washington to extend the government's borrowing power, encouraging signs from the global economy, and seasonal inflows into stocks.
Those factors helped the S&P 500 rally for a seventh day on Thursday to reach a five-year peak. But the index has struggled to convincingly climb above 1,500, a level it surpassed briefly on Thursday for the first time since December 2007 and momentarily topped again on Friday.
"We hit (1,500) yesterday, we've hit it today, it is going to take a little bit of work to get through it - it's a psychological resistance point," said Paul Mendelsohn, chief investment strategist at Windham Financial Services, in Charlotte, Vermont.
"The housing numbers coming in a little weaker, you would have expected that with Hurricane Sandy and the fiscal cliff," Mendelsohn said. "With everything that was going on in December, you would expect a little weaker number. Maybe analysts were looking for a little too much out of that report."
If the S&P 500 rises for an eighth day on Friday, it will be its longest winning streak since late 2004, when it rallied for nine straight days.
The Dow Jones industrial average gained 31.19 points, or 0.23 percent, to 13,856.52. The Standard & Poor's 500 Index advanced 3.48 points, or 0.23 percent, to 1,498.30. The Nasdaq Composite Index rose 13.05 points, or 0.41 percent, to 3,143.43.
Honeywell International Inc posted fourth-quarter earnings just above Wall Street's estimates, reflecting the diversified U.S. manufacturer's campaign to boost profit margins in the face of sluggish sales growth. Honeywell's stock shed 0.3 percent to $68.04.
The initial portion of earnings season has been encouraging relative to recent expectations. Overall, S&P 500 fourth-quarter earnings growth is on track for a 2.9 percent rise, up from the forecast of a 1.9 percent gain at the start of earnings season, but well below the 9.9 percent increase in an Oct. 1 forecast.
Thomson Reuters data through Friday showed that of the 147 S&P 500 companies that have reported earnings, 68 percent exceeded expectations. Since 1994, 62 percent of companies have topped expectations, while the average over the past four quarters stands at 65 percent.
Microsoft Corp gained 1.2 percent to $27.95 after posting a quarterly profit that edged lower as Office software sales slowed ahead of a new launch, offsetting a solid but unspectacular start for its Windows 8 operating system.
Halliburton Co shares jumped 5 percent to $39.70 after the world's second-largest oilfield services company reported higher-than-expected earnings and sales for the fourth quarter. Strong international drilling activity offset a slowdown in onshore North America work, Halliburton said.