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* GDP, labor data points to improved economic strength
* Vodafone in talks with Verizon to sell share of jointventure
* Housing stocks rally, rebounding after recent decline
* Indexes up: Dow 0.1 pct, S&P 0.2 pct, Nasdaq 0.8 pct
By Ryan Vlastelica
NEW YORK, Aug 29 (Reuters) - U.S. stocks closed modestlyhigher on Thursday as the economy showed signs of improvement,but uncertainty over possible military action against Syriacontinued to pressure markets.
Talks that could lead to a major deal in which U.S. phonecompany Verizon buys the part of Verizon Wireless it doesn'talready own from Vodafone helped push stocks higher.
Wall Street was solidly higher most of the session but paredgains in the last hour on concerns over Syria. Many in themarket expect a strike by the United States and its allies because of an alleged poison gas attack by government forces that killed Syrian civilians. U.S. officials said a responsewould be "discrete and limited."
"That there will be an attack is priced into markets, butthere's no way the market appreciates the implications beyondthat if the U.S. were to go to war," said Joe Tanious, globalmarket strategist at J.P. Morgan Funds in New York.
"It will create a lot of side effects the market isn't awareof, with the impact on oil the main complication."
U.S. crude futures have spiked 2.2 percent this weekon tensions oil supply from the Middle East will be interrupted.
Stocks rose after the government said in an upwardly revisedestimate the economy expanded by a stronger-than-expected 2.5percent in the second quarter. In a separate report, it saidweekly jobless claims fell more than anticipated last week, apossible sign that hiring improved in August.
The Dow Jones industrial average was up 16.36 points,or 0.11 percent, at 14,840.87. The Standard & Poor's 500 Index was up 3.21 points, or 0.20 percent, at 1,638.17. TheNasdaq Composite Index was up 26.95 points, or 0.75percent, at 3,620.30.
The S&P was unable to close above its 100-day moving averagefor a third straight day, an indication that near-term momentummay fade.
The robust data could bolster the case for the FederalReserve to soon wind down a major economic stimulus program thathas driven a rally of more than 15 percent in the S&P 500 thisyear.
The data "reiterates that the economy continues to grow,which is supportive to risk assets and bodes well for theprospect of future growth," said Tanious, who helps oversee $1.5trillion in assets.
"That the market is reacting positively to this shows thatinvestors have become more comfortable with the idea oftapering."
U.S.-listed shares of Vodafone Group jumped 8.1percent to $31.80 as the biggest percentage gainer on the Nasdaq100 index after the company said it was in talks withVerizon Communications to sell its 45 percent stake intheir U.S. joint venture, Verizon Wireless.
If completed, the deal could be worth around $130 billion,according to a person familiar with the situation, who asked notto be identified. Verizon rose 2.7 percent to $47.82 as one ofthe top boosts to the Dow.
Homebuilding stocks were among the strongest of the day.Lennar Corp rose 3.2 percent to $32.62 while PulteGroupInc was up 3.1 percent to $15.86.
After the market's close, software company Salesforce.comInc raised its full-year revenue outlook, sending itsshares 6.8 percent higher to $46.60.
Guess Inc jumped 13 percent to $30.82 in the wake ofsecond-quarter results that beat Wall Street estimates, buckinga trend of falling sales for apparel retailers.
Campbell Soup Co fell 3.1 percent to $43.33 afterreporting revenue that missed expectations.
About 63 percent of companies traded on the New York StockExchange closed higher while almost 70 percent of Nasdaq-listedshares ended higher. Volume was light, with about 4.74 billionshares changing hands on the New York Stock Exchange, the Nasdaqand NYSE MKT, below the daily average so far this year of about6.31 billion shares.
