* S&P 500 has gained 1.9 percent over past two sessions
* Q4 GDP revised to show growth, but less than expected
* J.C. Penney, Groupon both sink on weak revenue
* Dow up 0.2 pct, S&P up 0.3 pct, Nasdaq up 0.4 pct
By Ryan Vlastelica
NEW YORK, Feb 28 (Reuters) - U.S. stocks edged higher on Thursday, pointing to a third straight day of gains in the wake of some strong economic data, though a further advance may be limited with major averages near multi-year highs.
While some data released Thursday were rosy, a read on economic growth was weaker than expected, and analysts said a pullback may be in store a day after major equity indexes posted their biggest daily advance since early January.
Over the past two sessions, the S&P 500 has gained 1.9 percent, rising back above the closely watched level of 1,500. The Dow Jones industrial average moved within striking distance of an all-time high.
"The market is looking choppy, and I think investors should use this as an opportunity to sell into strength," said Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor. "This seems like an environment where someone should be conservative instead of aggressive."
The U.S. economy grew 0.1 percent in the fourth quarter, a weaker pace than expected, although a slightly better performance in exports and fewer imports led the government to scratch an earlier estimate of an economic contraction.
Separately, the number of Americans filing new claims for unemployment benefits fell more than expected last week, while the February Chicago Purchasing Managers Index unexpectedly rose to an 11-month high.
While equity markets suffered steep losses earlier in the week on concerns over European debt, they have since recovered, with the gains fueled by strong data and recent comments by Federal Reserve Chairman Ben Bernanke that showed continued support for the Fed's economic stimulus policy.
"Growth is still anemic and there are still issues with Europe. People seem to be ignoring the signs that would otherwise give them cause for concern," said McCormick, who helps oversee $8.2 billion in assets.
The Dow Jones industrial average was up 27.27 points, or 0.19 percent, at 14,102.64. The Standard & Poor's 500 Index was up 5.13 points, or 0.34 percent, at 1,521.12. The Nasdaq Composite Index was up 13.75 points, or 0.43 percent, at 3,176.01.
The benchmark S&P 500 has gained 1.4 percent in February, the Dow is up 1.7 percent and the Nasdaq has added 1 percent.
J.C. Penney Co Inc slumped 18 percent to $17.32 as the S&P's biggest decliner after the department store reported a steep drop in sales on Wednesday. Groupon Inc also slumped on weak revenue, with the stock off 25 percent at $4.50.
Mylan Inc jumped 6.5 percent to $30.45 on the Nasdaq after the generic drugmaker posted a 25 percent rise in fourth-quarter profit.
Investors were keeping an eye on the debate in Washington over sequestration - U.S. government budget cuts that will take effect starting on Friday if lawmakers fail to reach an agreement on spending and taxes. President Barack Obama and Republican congressional leaders arranged to hold last-ditch talks to prevent the cuts, but expectations were low that any deal would be produced.
With 93 percent of the S&P 500 companies having reported results so far, 69.5 percent have beaten profit expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters, according to Thomson Reuters data.
Fourth-quarter earnings for S&P 500 companies are estimated to have risen 6.2 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.