* Microsoft, Facebook gain after upbeat earnings reports
* Bank stocks buoyed by hawkish Fed comments
* UPS falls as higher costs hurt profit
* Apple, Alphabet, Amazon to report after the bell
* Indexes up: Dow 0.54 pct, S&P 0.35 pct, Nasdaq 0.25 pct (Updates to early afternoon)
By Tanya Agrawal
Feb 1 (Reuters) - Wall Street rose in early afternoon trading on Thursday, reversing from earlier losses, as strong reports from Facebook and Microsoft led the technology sector higher and hawkish comments from the Federal Reserves lifted bank stocks.
Facebook rose 4.3 percent after the company said it expects ad sales to rise despite a dip in usage on the social media network.
Microsoft was up 0.88 percent, reversing from a decline in premarket trading, after beating Wall Street's profit forecast on growth in its cloud computing business.
The technology sector was up 0.53 percent. Its gainers included Apple, which is to report earnings after the bell, along with Alphabet and Amazon .
Strong reports from S&P 500 companies so far have pushed up analysts' fourth-quarter profit growth estimate to 13.7 percent, from 12 percent at the start of the month, according to Thomson Reuters data.
At 12:32 p.m. ET (1732 GMT), the Dow Jones Industrial Average was up 141.57 points, or 0.54 percent, at 26,290.96, the S&P 500 was up 9.92 points, or 0.35 percent, at 2,833.73 and the Nasdaq Composite was up 18.31 points, or 0.25 percent, at 7,429.79.
The market opened lower, a day after the Federal Reserve kept interest rates unchanged, but raised its inflation outlook for the year and flagged "further gradual" rate hikes. Currently the market has priced in three rate hikes for 2018.
"There are concerns that rates are moving up and inflation is firming," said Jeff Zipper, managing director for investments at Private Client Reserve at U.S. Bank.
"If inflation moves higher then the chances of a fourth rate hike go up. The market is a lot more jittery and is dissecting every piece of economic data more closely."
Economic data also painted a mixed picture. An unexpected drop in weekly jobless claims pointed to a tight labor market. But while fourth-quarter nonfarm productivity fell for the first time in seven quarters, unit labor costs rose, which could signal faster inflation. Another report showed U.S. factory activity slowed in January as new orders fell.
The economic data-heavy week will culminate in the nonfarm payrolls data on Friday.
Banks, which tend to benefit from higher interest rates gained, leading the financial sector up 0.66 percent.
Other notable stock movers included eBay, which jumped 14.1 percent after reporting a strong holiday quarter and saying it would eventually move away from PayPal as its main payments partner. PayPal fell 6.2 percent.
UPS dropped 5.8 percent after the world's largest package delivery company reported a fourth-quarter net profit that was hurt by additional costs.
Advancing issues outnumbered decliners on the NYSE by 1,503 to 1,372. On the Nasdaq, 1,511 issues rose and 1,343 fell.
The S&P 500 index showed 25 new 52-week highs and seven new lows, while the Nasdaq recorded 60 new highs and 55 new lows. (Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza and Anil D'Silva)