US STOCKS-S&P 500 extends rally to 5th week

* Benchmark S&P index rises 3.6 percent in week

* U.S. non-farm payrolls surge in October

* Kraft limits gains in Dow after weak quarterly revenue

* Indexes up: Dow 0.1 pct, S&P 0.4 pct, Nasdaq 0.1 pct

* For up-to-the-minute market news see [STXNEWS/US] (Updates to close)

By Ryan Vlastelica

NEW YORK, Nov 5 (Reuters) - U.S. stocks rose for the fifth straight week as investors took heart from Republican gains in the elections and on news that more cheap money from the Federal Reserve was on the way.

Following a 3.6 percent rise in the S&P 500 this week, investors locked in profits on Friday, offsetting an unexpectedly strong payrolls report that reinforced optimism about the economy. The market closed slightly higher.

"Because of these gains, I feel there's a relatively modest correction that's just around the corner," said King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco. "But there's a lot of optimism out there, and the jobs picture is looking better."

A government jobs report suggested the sluggish recovery could be picking up steam. Non-farm payrolls rose a solid 151,000 in October, the first gain since May and more than double economists' expectations. For details, see [ID:nN04265378]

GOOD NEWS FOR MARKET

The news came two days after the Fed detailed a plan to buy $600 billion in government bonds over coming months to boost the economy, and three days after Republicans made gains in U.S. elections, signaling the possibility of a more business-friendly Congress.

"Good news is good news. The commodity markets and the stock markets all got everything they wanted this week, which is incredible," said Jeffrey Friedman, senior market strategist at Lind-Waldock in Chicago.

The Dow Jones industrial average <.DJI> edged up 9.24 points, or 0.08 percent, at 11,444.08. The Standard & Poor's 500 Index <.SPX> added 4.78 points, or 0.39 percent, to 1,225.84. The Nasdaq Composite Index <.IXIC> rose 1.64 points, or 0.06 percent, to 2,578.98.

The S&P 500 has risen about 16 percent since September and indexes surged to two-year highs on Thursday, but investors began to question how long the upward trend could continue without a breather.

In a technical barrier, the 61.8 percent retracement of the slide in the S&P 500 from the historic highs in 2007 to the lows in March 2009 is 1,228.74, near Friday's session high of 1,227.08.

Kraft Foods Inc was the second biggest percentage loser on the Dow, falling 2.2 percent to $31.08 a day after it reported third-quarter revenue that was weaker than expected and commented on its 2011 forecast. [ID:nN04194868] [ID:nN05295408]

After the closing bell, Boeing Co fell 2.5 percent to $69.51 in extended trading on an Aviation Week report that said the Dow component expects delivery delays of its 787 aircraft. [ID:nWEN2675]

The S&P telecommunications <.GSPL> and healthcare sectors <.GSPA> led the downdraft, with losses of 0.6 percent and 0.5 percent, respectively. Pharmaceutical companies were also lower, with Merck & Co down 2.6 percent to $35.70 and Pfizer Inc off 1.2 percent to $17.18.

Financials substantially outperformed other sectors, with the S&P financial index <.GSPF> advancing 2.1 percent. The Fed is expected to soon allow some healthy banks to increase dividend payments, people familiar with the decision said late Thursday.

JPMorgan Chase & Co gained 2.9 percent to $40.94 and Bank of America shot up 1.9 percent to $12.36. Option traders furiously snapped up calls on the Financial Sector Sector SPDR fund , which rose 1.8 percent.

More than four stocks rose for every three that fell on the New York Stock Exchange, while on the Nasdaq, about five stocks rose for every four that fell.

Volume was strong, with about 9.40 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, above the year-to-date daily average of 8.73 billion. (Reporting by Ryan Vlastelica; Additional reporting by Leah Schnurr; Editing by Kenneth Barry)