* S&P 500 poised to rally for an eighth straight day
* ECB's Draghi sees euro zone recovery; German confidence up
* Procter & Gamble profit improves
* Indexes up: S&P 0.3 pct, Dow 0.2 pct, Nasdaq 0.3 pct
By Edward Krudy
NEW YORK, Jan 25 (Reuters) - U.S. stocks rose on Friday, buoyed by sturdy corporate earnings from Procter & Gamble and Honeywell, with the S&P 500 poised for its longest winning streak in more than eight years.
The strong start for the equity market this year has been attributed to solid corporate results, 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 a five-year peak. Still, the index struggled to climb convincingly above 1,500, a level it surpassed briefly Thursday for the first time since December 2007.
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.
"We are seeing a very broad-based rally and the ingredients are still in place," said Steve Goldman, principal at Goldman Management in Short Hills, New Jersey. "This is the lift-off phase and it's still significant."
Procter & Gamble, the world's top household products maker, said quarterly profit soared past expectations and raised its sales and earnings outlook for the fiscal year. Shares rose 3.5 pct to $72.93.
The Dow Jones industrial average gained 27.45 points, or 0.20 percent, to 13,852.78. The Standard & Poor's 500 Index rose 4.19 points, or 0.28 percent, to 1,499.01. The Nasdaq Composite Index added 8.63 points, or 0.28 percent, to 3,139.01.
Honeywell International Inc posted fourth-quarter earnings just above Wall Street estimates, reflecting the diversified U.S. manufacturer's campaign to boost profit margins in the face of sluggish sales growth. The shares rose 0.9 percent to $68.82.
Pointing to a rotation out of bonds, U.S. 30-year Treasury bonds traded more than a point lower in price on Friday, with yields touching session highs at 3.10 percent.
"You have had more confidence from fund managers to provide more allocations to equity markets," which looked more attractive than bonds or cash, said Rick Meckler, president of investment firm LibertyView Capital Management.
Recent company earnings have been encouraging. Thomson Reuters data through early Thursday showed that of the 133 S&P 500 companies that have reported earnings so far, 66.9 percent exceeded expectations, more than the 65 percent average over the past four quarters.
Microsoft Corp reported lower quarterly profit on Thursday as Office software sales slowed ahead of a new launch, offsetting a solid but unspectacular start for its Windows 8 operating system and sending the company's shares down 0.2 percent to $27.51.
Apple stepped up audits of working conditions at major suppliers last year, discovering multiple cases of underage workers, discrimination and wage problems. The shares, which fell 12 percent Thursday after disappointing earnings, were little changed at around $450.93.
German business morale improved for a third consecutive month in January to its highest in more than half a year, providing further evidence that growth in Europe's largest economy was gathering speed after contracting late last year.
Echoing a more positive tone in Europe, ECB President Mario Draghi said on Friday he expects the euro zone economy to recover later this year, and that financial market improvements had not yet trickled into the general economy.