* GDP, labor data points to improved economic strength
* Vodafone in talks with Verizon to sell share of joint venture
* 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 modestly higher on Thursday as the economy showed signs of improvement, but uncertainty over possible military action against Syria continued to pressure markets.
Talks that could lead to a major deal in which U.S. phone company Verizon buys the part of Verizon Wireless it doesn't already own from Vodafone helped push stocks higher.
Wall Street was solidly higher most of the session but pared gains in the last hour on concerns over Syria. Many in the market 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 response would be "discrete and limited."
"That there will be an attack is priced into markets, but there's no way the market appreciates the implications beyond that if the U.S. were to go to war," said Joe Tanious, global market strategist at J.P. Morgan Funds in New York.
"It will create a lot of side effects the market isn't aware of, with the impact on oil the main complication."
U.S. crude futures have spiked 2.2 percent this week on tensions oil supply from the Middle East will be interrupted.
Stocks rose after the government said in an upwardly revised estimate the economy expanded by a stronger-than-expected 2.5 percent in the second quarter. In a separate report, it said weekly jobless claims fell more than anticipated last week, a possible 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. The Nasdaq Composite Index was up 26.95 points, or 0.75 percent, at 3,620.30.
The S&P was unable to close above its 100-day moving average for a third straight day, an indication that near-term momentum may fade.
The robust data could bolster the case for the Federal Reserve to soon wind down a major economic stimulus program that has driven a rally of more than 15 percent in the S&P 500 this year.
The data "reiterates that the economy continues to grow, which is supportive to risk assets and bodes well for the prospect of future growth," said Tanious, who helps oversee $1.5 trillion in assets.
"That the market is reacting positively to this shows that investors have become more comfortable with the idea of tapering."
U.S.-listed shares of Vodafone Group jumped 8.1 percent to $31.80 as the biggest percentage gainer on the Nasdaq 100 index after the company said it was in talks with Verizon Communications to sell its 45 percent stake in their 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 not to be identified. Verizon rose 2.7 percent to $47.82 as one of the top boosts to the Dow.
Homebuilding stocks were among the strongest of the day. Lennar Corp rose 3.2 percent to $32.62 while PulteGroup Inc was up 3.1 percent to $15.86.
After the market's close, software company Salesforce.com Inc raised its full-year revenue outlook, sending its shares 6.8 percent higher to $46.60.
Guess Inc jumped 13 percent to $30.82 in the wake of second-quarter results that beat Wall Street estimates, bucking a trend of falling sales for apparel retailers.
Campbell Soup Co fell 3.1 percent to $43.33 after reporting revenue that missed expectations.
About 63 percent of companies traded on the New York Stock Exchange closed higher while almost 70 percent of Nasdaq-listed shares ended higher. Volume was light, with about 4.74 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.31 billion shares.