* Pfizer to buy Hospira for about $15 billion
* Twitter gains after Bloomberg reports deal with Google
* Michael Kors tumbles after results, outlook
* Indexes up: Dow 0.52 pct, S&P 0.47 pct, Nasdaq 0.43 pct (Updates to market open)
By Chuck Mikolajczak
NEW YORK, Feb 5 (Reuters) - U.S. stocks advanced on Thursday, bouncing back from a late selloff in the prior session thanks to higher oil prices, an upbeat report on the labor market, and news Pfizer would buy Hospira in a massive deal.
Weekly jobless claims rose to 278,000 last week, below expectations calling for 290,000 claims. The report comes on the heels of a private payrolls report that fell short of expectations on Wednesday and ahead of a monthly employment report on Friday.
"Employment continue to improve at a fairly moderate pace, which feels breakneck compared to the past, which means people are getting jobs and that is a big positive for the economy," said David Heidel, regional investment strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota.
"The problem is every time we get confirmation that the jobs picture is improving, it also sparks worries the Federal Reserve will act sooner than later to raise rates and continues this schizophrenic up and down forces on risk assets like equity prices."
Oil prices resumed their advance, with U.S. crude up 3 percent to $49.93 and Brent up 3.39 percent to $55.93. The S&P energy index jumped 1.6 percent.
Adding to the positive tone was news that Pfizer would buy Hospira Inc for about $15 billion to gain access to its biosimilars. Hospira shares rocketed 35.2 percent to $87.61 as the best performer on the S&P 500, while Pfizer gained 2.7 percent $33.93 as the biggest boost to the index.
Other data showed the U.S. trade deficit in December widened sharply to its highest since 2012, which could damp down the fourth-quarter growth estimate, and nonfarm productivity fell more than expected in the fourth quarter.
The Dow Jones industrial average rose 92.57 points, or 0.52 percent, to 17,765.59, the S&P 500 gained 9.67 points, or 0.47 percent, to 2,051.18 and the Nasdaq Composite added 20.17 points, or 0.43 percent, to 4,736.87.
The S&P 500 snapped a two-day rally of 2.8 percent on Wednesday, after the European Central Bank abruptly canceled its acceptance of Greek bonds in return for funding and crude prices ended a four-day run of gains.
Greece said on Thursday it would not be "blackmailed" by its European Union partners but it did want to find a joint solution to its debt and austerity crisis.
Twitter shares climbed 3 percent to $41.96 after Bloomberg reported that the microblogging site had reached a deal with Google to make its tweets more searchable online.
Investors kept an eye on retailers' monthly sales results to assess the impact lower gas prices have had on consumer spending. L Brands rose 4.6 percent to $90.53 after reporting quarterly results and a 7 percent rise in January same-store sales.
Michael Kors shares fell 3.1 percent to $69.14 after the luxury accessories retailer posted third-quarter results and forecast a lower-than-expected profit for the current quarter.
Advancing issues outnumbered declining ones on the NYSE by 1,864 to 836, for a 2.23-to-1 ratio on the upside; on the Nasdaq, 1,617 issues rose and 553 fell for a 2.92-to-1 ratio.
The benchmark S&P 500 index posted 24 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 42 new highs and 11 new lows.
Editing by Bernadette Baum