* Jobless claims fall more than expected
* China data sparks fears of tightened policy
* Morgan Stanley profit jumps 60 percent
* Futures off: S&P 2.5 pts, Dow 9 pts, Nasdaq 2.5 pts (Updates with jobless claims data)
By Angela Moon
NEW YORK, Jan 20 (Reuters) - U.s. stocks were set to open little changed on Thursday as encouraging labor market data offset worries that China's rapid economic growth may lead to more aggressive measures to tackle inflation.
U.S. stock index futures pared early losses, with S&P and Nasdaq futures briefly turning positive after the government said initial jobless claims notched their biggest decline in nearly a year.
"I'm very happy about this number. I take it as a big positive ... This is where we need claims to come in if we're going to see the rally continue," said Michael O'Rourke, chief market strategist at BTIG Llc in New York.
Morgan Stanley, the No. 2 U.S. investment bank, posted a 60 percent jump in quarterly profit as rising fees from retail brokerage offset weak fixed-income trading results. The stock was up 1.5 percent at $28.17.
On Wednesday, the S&P 500 suffered its worst decline in nearly two months on disappointing results from Goldman Sachs and Wells Fargo.
S&P 500 futures fell 2.5 points and were in line with fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were down 9 points, while Nasdaq 100 futures gained 2.5 points.
On the downside, shares of networking/cloud computing companies will be in the spotlight after F5 Networks Inc forecast weak revenues, sparking concerns that Internet traffic may not be growing as fast as expected. F5 Networks was down 19.8 percent at $111.17 premarket.
Chinese gross domestic product soared past forecasts to grow 9.8 percent in the fourth quarter, with inflation slowing less than expected. This may lead Beijing to move more aggressively to quell growth and keep the economy from overheating.
Investors also awaited a flurry of quarterly results from companies such as Google Inc, Johnson Controls Inc and Advanced Micro Devices Inc.
Google is expected to report a 22 percent jump in fourth-quarter revenue, though it will face questions about long-term growth.
EBay Inc will also be in the spotlight after the online auctioneer offered a bullish 2011 profit outlook after the holiday quarter suggested a turnaround. The stock was up 2.5 percent at $29.84 in premarket trade.