* Morgan Stanley up as profit tops expectations
* Microsoft provides biggest boost to the three indexes
* Disney drags on Dow, S&P after brokerage downgrade
* Indexes up: Dow 0.22 pct, S&P 0.44 pct, Nasdaq 0.97 pct (Adds details, changes quotes, updates prices)
By Tanya Agrawal and Anya George Tharakan
July 20 (Reuters) - U.S. stocks rose on Wednesday, with the Dow and the S&P 500 hitting fresh records, as Microsoft's strong results boosted optimism regarding the health of quarterly earnings.
Also helping stocks was a reversal in oil prices, with Brent crude up nearly 1 percent, after data shows weekly crude inventories fell slightly more than expected.
Microsoft surged 6.4 percent to $56.47, providing the biggest boost to the three major indexes, after its results handily beat expectations.
The technology index rose 1.34 percent, leading the six gainers among the 10 major S&P sectors. The energy index was flat, pulling back from a decline of 1 percent.
Morgan Stanley was up 2.1 percent at $28.79 after its profit topped analysts' estimates, rounding off upbeat results from the six biggest Wall Street banks.
The stock market's record-setting rally had so far been driven by defensive stocks such as telecoms and consumer staples. Investors are keeping a sharp eye on corporate earnings to see if other sectors can help sustain the momentum.
"The market has been rallying on the expectation of good earnings with some companies even providing decent forecasts," said Thomas Wilson, managing director of wealth advisory at Brinker Capital.
"What we've seen is a market rally that has been led by defensive sectors such as telecom, but now we're seeing the market move up on cyclical sectors like technology."
At 10:53 a.m. ET (1453 GMT) the Dow Jones industrial average was up 40.88 points, or 0.22 percent, at 18,599.89. It hit a record intraday high of 18,618.93.
The S&P 500 was up 9.45 points, or 0.44 percent, at 2,173.23, easing slightly after hitting an all-time intraday high of 2,174.25.
The Nasdaq Composite was up 49.01 points, or 0.97 percent, at 5,085.38.
Wilson said for the market to sustain its momentum, earnings would need to beat expectations and the economy would also have to show signs that it is doing well.
Second-quarter earnings estimates have eased. Profits at S&P 500 companies are now expected to fall by 4.3 percent, less than the 4.5 percent decline estimated earlier, according to Thomson Reuters I/B/E/S.
Disney fell 1.7 percent to $97.78 after a Stifel rating downgrade. The stock was the biggest drag on the S&P and the Dow.
Intel, eBay and American Express are scheduled to report results after the bell. All three stock were up under 1 percent.
Advancing issues outnumbered decliners on the NYSE by 1,902 to 882. On the Nasdaq, 1,841 issues rose and 720 fell.
The S&P 500 index showed 37 new 52-week highs and no new lows, while the Nasdaq recorded 68 new highs and 13 new lows. (Reporting by Tanya Agrawal and Anya George Tharakan; Editing by Savio D'Souza)