CORRECTED-US STOCKS-Wall Street gains on data, focus still on Washington
(Corrects sixth paragraph to Representative Pete Sessions instead of Senator Jeff Sessions)
* Senate Republican sees no govt shutdown or default
* Jobless claims and home sales drop, GDP unrevised
* Indexes up: Dow 0.6 pct, S&P 0.5 pct, Nasdaq 0.8 pct
By Chuck Mikolajczak
NEW YORK, Sept 26 (Reuters) - U.S. stocks rose on Thursday after upbeat job market data and following five days of declines, with investors still focused on the possible economic impact of an ongoing impasse in budget and debt negotiations in Washington.
The U.S. Congress, struggling to avert a government shutdown next week, was warned by the Obama administration on Wednesday that the Treasury was quickly running out of funds to pay government bills and could soon face a damaging debt default.
Investor angst was heightened as lawmakers grappled with another potential crisis - Federal agency shutdowns that could begin with the new fiscal year next Tuesday, unless Congress comes up with emergency funds.
Lawmakers have given themselves very little time to come up with an agreement, said Art Hogan, managing director at Lazard Capital Markets in New York.
"I hope it doesn't take a big (market) slide to get them to say 'this is what happens when we mess up'," he said.
House of Representatives Speaker John Boehner urged his unruly caucus to show flexibility over a measure to keep the government open. Separately, Republican Representative Pete Sessions said there would be no shutdown or government default.
The House debt-limit increase bill will likely include a delay in the implementation of the Obama healthcare law, which could delay its passage in the Senate.
In a promising sign for the labor market, the number of Americans filing new claims for jobless benefits fell last week to a near six-year low.
Fed officials, including Cleveland Fed President Sandra Pianalto and Minneapolis Fed President Narayana Kocherlakota, are due to speak on Thursday. Traders were still puzzled about the immediate future of the U.S. central bank's stimulus program that has boosted stock prices for much of the year.
Other data showed the U.S. government left its estimate for economic growth in the second quarter unchanged at 2.5 percent.
The Dow Jones industrial average rose 88.11 points, or 0.58 percent, to 15,361.37, the S&P 500 gained 8.64 points, or 0.51 percent, to 1,701.41 and the Nasdaq Composite added 30.712 points, or 0.82 percent, to 3,791.81.
The S&P is 1.4 percent below its record closing high set last week.
J.C. Penney shares rose 4 percent after a sharp slide in premarket trading, after the company said it was pleased with the progress of its turnaround efforts. The struggling retailer is looking to raise as much as $1 billion in new equity to build its cash reserves.
Bed Bath and Beyond rose 4.7 percent to $77.70 a day after it reported a jump in second-quarter profit as the U.S. housing market recovery spurred demand for its products.
Hertz Global shares dropped 11.5 percent to $22.82 after the car rental company cut its full-year forecast.
Eli Lilly fell 2.8 percent to $51.14 after its experimental cancer drug failed to improve survival among breast cancer patients without their cancer worsening in a late-stage trial.
Nike Inc will report results after the closing bell. It will be the first earnings report for the retailer as a member of the blue-chip Dow Jones industrial average. Shares were up 1.43 percent in morning trading at $69.84. (Editing by Bernadette Baum)