* Market at 29-month high, bolstered by earnings
* Microsoft surprises with profit but shares are flat
* Dow gains are limited by P&G, AT&T results
* Amazon.com, Sandisk slip in extended trade after results
* Stocks: Dow flat, S&P up 0.2 pct, Nasdaq up 0.6 pct
* For up-to-the-minute market news see [STXNEWS/US] (Updates with Amazon, Sandisk results in paragraphs 11-13)
By Angela Moon
NEW YORK, Jan 27 (Reuters) - Strong corporate earnings led Wall Street to a 29-month closing high for a second day on Thursday, but another run of big gains may be harder to achieve.
The Dow and the S&P struggled to advance past major technical levels -- the 12,000 mark for the Dow and 1,300 for the S&P -- but investors see more gains for companies that outperform in their earnings.
Microsoft Corp
Microsoft stock ended regular trading up 0.3 percent at $28.87 after the earnings were posted on the company's website. Microsoft was down slightly in after-hours trading.
Other technology stocks, such as Netflix and Qualcomm, supported the Nasdaq, but disappointing results from blue chips AT&T and Procter & Gamble kept the Dow's advance in check.
"What's healthy is that companies that come out with good reports are being rewarded and those that are not are getting punished," said Randall Warren, president at Warren Financial Service in Philadelphia.
The Dow Jones industrial average <.DJI> finished up 4.39 points, or 0.04 percent, at 11,989.83. The Standard & Poor's 500 Index <.SPX> closed up 2.91 points, or 0.22 percent, at 1,299.54. The Nasdaq Composite Index <.IXIC> was up 15.78 points, or 0.58 percent, at 2,755.28.
Movie-rental company Netflix Inc
Dow components AT&T
"The market is not viewing everything as being correlated, like it used to before," Warren said.
The technology sector, however, may start off weak on Friday, pressured by Amazon.com and Sandisk, both of which slipped after reporting after the market's close.
Amazon.com
Sandisk Corp
The S&P 500 faces technical resistance near 1,300, an area where closing and session highs clustered during August 2008. Technical analysts also view 12,000 on the Dow as a possible sell trigger as the blue-chip average approaches nine straight weeks of gains.
The S&P has risen 2 percent since the start of the earnings season and is up 23.7 percent since Sept. 1. Various technical measures indicate the market may be overstretched.
Qualcomm Inc
Caterpillar
Thomson Reuters data showed 71 percent of the S&P 500 companies that have reported earnings so far have beaten estimates.
Weekly initial jobless claims surged to the highest level since late October while factory orders fell unexpectedly in December, the government said. [ID:nN27280337]
Trading volume was 7.6 billion shares on the New York Stock Exchange, the American Stock Exchange and Nasdaq, down from last year's estimated daily average of 8.47 billion shares.
Advancing stocks outnumbered declining ones on the NYSE by 1,673 to 1,312. On the Nasdaq, advancers beat decliners by 1,348 to 1,284. (Reporting by Angela Moon; Editing by Kenneth Barry)