* Initial jobless claims climb more than expected
* Factory orders fall for sixth straight month
* AbbVie to buy Pharmacyclics for about $21 bln
* Indexes up: Dow 0.2 pct, S&P 0.18 pct, Nasdaq 0.39 pct (Updates to afternoon, adds commentary)
By Sinead Carew
NEW YORK, March 5 (Reuters) - U.S. stocks were modestly higher on Thursday after two days of declines as investors held back on big bets ahead of Friday's jobs report, which is expected to be a big factor in influencing the timing of a Federal Reserve interest rate hike.
The S&P and the Dow hit records and the Nasdaq surpassed 5,000 at the start of the week after a strong February performance for U.S. stocks.
"People are taking a wait-and-see approach ahead of the jobs report," said Paul Brigandi, managing director of portfolio management at Direxion Funds in New York.
European news was some help to U.S. markets on Thursday but higher-than-expected U.S. jobless claims took "a little bit of the wind out of the sails," Brigandi said.
Initial jobless claims rose to 320,000 in the latest week, above the 295,000 estimate. The disappointing numbers came after a weaker-than-expected private payrolls report on Wednesday and ahead of Friday's monthly employment report.
A separate report showed new orders for U.S. factory goods unexpectedly fell in January for a sixth month, a sign of weakness in the manufacturing sector.
The Dow Jones industrial average rose 36.89 points, or 0.2 percent, to 18,133.79, the S&P 500 gained 3.84 points, or 0.18 percent, to 2,102.37 and the Nasdaq Composite added 19.32 points, or 0.39 percent, to 4,986.46.
Earlier in the day, the European Central Bank raised growth and inflation targets and announced it would start its new government bond-buying program of 60 billion euros a month on March 9.
Healthcare stocks helped the S&P 500 stay positive in the late afternoon. Biogen Idec rose 2.4 percent to $424.24.
AbbVie said it would buy Pharmacyclics for about $21 billion, giving it access to what is expected to be one of the world's top-selling cancer drugs and expanding its reach in the profitable oncology field. Pharmacyclics shares jumped 10.2 percent to $254.07 while AbbVie fell 5.8 percent to $56.70.
"M&A activity gets everybody excited in that sector," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
Kroger rose 7 percent to $74.63. The biggest U.S. supermarket operator reported a 23 percent rise in quarterly profit and forecast full-year earnings above expectations.
Advancing issues outnumbered declining ones on the NYSE by 1,636 to 1,369, for a 1.20-to-1 ratio; on the Nasdaq, 1,564 issues rose and 1,114 fell for a 1.40-to-1 ratio favoring advancers.
The S&P 500 was posting 21 new 52-week highs and 2 new lows; the Nasdaq Composite was recording 86 new highs and 35 new lows. (Editing by Bernadette Baum and Nick Zieminski)