US STOCKS-Wall St rallies on China stimulus, cautious earnings optimism

* Hasbro (NasdaqGS: HAS - news) reports surprise revenue rise, shares jump

* Royal Caribbean falls as strong dollar hurts onboard spending

* IBM (NYSE: IBM - news) to report after the bell

* Indexes up: Dow 1.2 pct, S&P 0.93 pct, Nasdaq 1.15 pct (Updates to afternoon)

By Noel Randewich

April 20 (Reuters) - U.S. stocks rose on Monday, reversing much of the previous session's sharp decline, as China's steps to stimulate its slowing economy and cautious optimism about U.S. earnings lured investors into equities.

In the second industry-wide cut in two months, China's central bank on Sunday reduced the amount of cash that banks must hold as reserves in a move to help spur bank lending and combat slowing growth.

"China was part of a two-pronged news event that caused part of the selloff on Friday. The move over the weekend changed that perspective and caused a little bit of a boost today," said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin.

Morgan Stanley (Xetra: 885836 - news) shares rose 1.08 percent to $37.15 after the Wall Street investment bank reported a 60 percent rise in quarterly profit and boosted its dividend.

Hasbro jumped 11.24 percent after the toymaker reported a surprise increase in revenue. Royal Caribbean fell 7.15 percent after it reported a fall in revenue, saying a strong dollar hurt spending on its cruise ships.

At 1:24 p.m., the Dow Jones industrial average rose 214.1 points, or 1.2 percent, to 18,040.4, the S&P 500 gained 19.41 points, or 0.93 percent, to 2,100.59 and the Nasdaq Composite added 56.67 points, or 1.15 percent, to 4,988.49.

Nearly 76 percent of the S&P 500 components that have reported earnings above analyst expectations, topping the 70 percent average in the last four quarters. But just 47 percent beat on revenue, compared to the 58 percent average.

Earnings of U.S. multinationals have been hurt by unusual strength in the dollar, which was up 0.44 percent against a basket of major currencies on Monday and has gained 8 percent so far in 2015.

"I'm hoping companies will say 'OK, we've had a miserable first quarter but things are improving,'" said Kurt Brunner, a portfolio manager at Swarthmore Group in Philadelphia.

Corporations expected to report earnings this week include major technology names Facebook (NasdaqGS: FB - news) , Google (Xetra: A0B7FY - news) , Qualcomm (Swiss: QCOM.SW - news) , Microsoft (NasdaqGS: MSFT - news) , and Amazon.com (NasdaqGS: AMZN - news) . IBM is due after the bell on Monday.

Advancing issues outnumbered declining ones on the NYSE by 2,268 to 714, for a 3.18-to-1 ratio; on the Nasdaq, 1,849 issues rose and 850 fell for a 2.18-to-1 ratio favoring advancers.

The benchmark S&P 500 was posting 2 new 52-week highs and 1 new low; the Nasdaq Composite was recording 37 new highs and 43 new lows. (Additional reporting by Rodrigo Campos in New York; Editing by Chizu Nomiyama and Nick Zieminski)