* Jobless claims fall more than expected, Q1 GDP revised lower
* Apple to buy Beats for $3 bln
* Hillshire jumps, Tyson's bid outshines Pilgrim's Pride's
* Indexes up: Dow 0.1 pct, S&P 500 0.29 pct, Nasdaq 0.34 pct (Updates to mid-afternoon, changes byline)
By Chuck Mikolajczak
NEW YORK, May 29 (Reuters) - U.S. stocks rose on Thursday and the benchmark S&P 500 index hit a record intraday high for the third straight day as traders bet on improvement in the second quarter even as data showed the world's largest economy contracted in the first quarter.
The gains were supported by a report showing the number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to a strengthening labor market. Separately, the Commerce Department cut its estimate of gross domestic product to show the economy shrank at a 1.0 percent annual rate, but there were signs it has rebounded.
"The headline figure was weaker than expected, but it was mainly due to slower inventory growth, which bodes well for future growth, future orders, new orders," said Jeffrey Saut, chief investment strategist at Raymond James Financial in St. Petersburg, Florida.
Saut said unless a decline materialized this week, "It's probably not going to come back below 1,890 - 1,900 (level), which is where the near term support is."
Citi analysts said the U.S. economy could grow nearly 4 percent in the second quarter while Goldman Sachs upped its estimate to 3.9 percent.
The Dow Jones industrial average rose 16.96 points or 0.1 percent, to 16,650.14, the S&P 500 gained 5.63 points or 0.29 percent, to 1,915.41 and the Nasdaq Composite added 14.40 points or 0.34 percent, to 4,239.47.
The U.S. 10-year note yield brushed against 2.40 percent to hit its lowest since last June, on expectations of further policy easing by the European Central Bank next week. Low yields could continue to entice investors into dividend-paying stocks, with high-yielding utilities widely outperforming the S&P 500 so far this year.
Hillshire Brands shares surged 17.7 percent to $52.76 after Tyson Foods offered to top a bid from Pilgrim's Pride. Tyson shares rose 6.3 percent to $43.30 and Pilgrim's Pride fell 1.9 percent to $24.91.
Shares of cyber security software maker Palo Alto Networks jumped 7.5 percent to $74.71 a day after it reported better-than-expected quarterly revenue as it added more customers, and said it settled patent litigation with network gear maker Juniper Networks.
Apple shares gained 1.8 percent to $635 after hitting its highest in a year and a half, a day after announcing it will buy music streaming and audio equipment company Beats for about $3 billion and bring its founders, producer Jimmy Iovine and rapper Dr. Dre, into Apple's ranks. (Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)