* ECB cuts rates below zero to spur bank lending
* Rite Aid shares slide after outlook
* Sprint agrees to pay about $32 bln for T-Mobile US - source
* Indexes up: Dow 0.6 pct, S&P 0.6 pct, Nasdaq 1 pct (Updates to close)
By Angela Moon
NEW YORK, June 5 (Reuters) - U.S. stocks rose on Thursday, with the S&P 500 hitting a record for the seventh time in eight sessions, after the European Central Bank cut rates to record lows and pledged to do more if needed to fight off the risk of deflation.
Also helping stocks: hedge fund manager David Tepper was reported by CNBC as saying the ECB move partly "alleviated" his concerns about the market, after having said last month he was worried stock prices were stretched.
The ECB cut the deposit rate to -0.10 percent and launched a series of measures to pump money into the sluggish euro zone economy. It stopped short of full-fledged quantitative easing (QE) - printing money to buy assets - but ECB President Mario Draghi said more action would come if necessary.
"A lot of people were short, expecting a pullback coming into the ECB decision," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. "I think people were positioned for things to be underwhelming."
Investors are now focused on Friday's U.S. payrolls report for May. It is expected to show job growth slowed last month and the unemployment rate ticked up, but not by enough to upset the view that the economy is bouncing back.
The number of Americans filing new claims for unemployment benefits rose last week, but the underlying trend continued to point to a firming labor market.
"The number of data we got this week so far on the labor market have not provided a clear direction for tomorrow's numbers," said Randy Frederick, managing director of trading and derivatives with the Schwab Center for Financial Research in Austin.
"So I wouldn't be surprised if the market sold on the (payrolls) news tomorrow, but it's likely to just be a knee-jerk reaction."
The Dow Jones industrial average rose 95.3 points or 0.57 percent, to 16,832.83, the S&P 500 gained 11.81 points or 0.61 percent, to 1,939.69 and the Nasdaq Composite added 42.54 points or 1 percent, to 4,294.18.
Zynga Inc shares fell 10 percent to $2.95 on heavy volume. Chief Executive Don Mattrick said late Wednesday the mobile game company was "nowhere near where we should ultimately be" with margins on its earnings before interest, taxes, depreciation, and amortization.
Sprint has agreed to pay about $40 per share to buy T-Mobile US, marking further progress in the attempt to merge the third and fourth-biggest U.S. mobile network operators, a person familiar with the matter told Reuters on Wednesday. Sprint shares fell 3.5 percent to $9.07 while T-Mobile US dropped 2.8 percent to $33.33.
Rite Aid shares slid 7.8 percent to $7.84 after it estimated first-quarter profit much below expectations.
Ciena Corp shares jumped 18.3 percent to $22.47 after the company posted earnings that beat expectations and gave a revenue outlook above forecasts. (Reporting by Angela Moon; Editing by Nick Zieminski)