US STOCKS-Wall Street gains after GDP data

*US second-quarter GDP revision stronger than expected

*Oil rises as storm Gustav threatens US Gulf

*Dow up 0.8 pct, S&P 500 up 0.7 pct, Nasdaq up 0.5 pct (Updates to early morning)

By Kristina Cooke

NEW YORK, Aug 28 (Reuters) - U.S. stocks rose on Thursday after second-quarter U.S. growth was revised up much more than expected, buoying optimism about the economy.

A separate report showed the number of U.S. workers filing new claims for jobless benefits fell to a level that was a touch lower-than-expected.

Industrial conglomerates such as Caterpillar (CAT.N), often described as an economic bellwether, led the indexes higher.

But the rising price of oil kept gains in check. Oil jumped above $120 a barrel boosted by the threat of damage to U.S. oil installations in the Gulf of Mexico from Tropical Storm Gustav. For details, see [ID:nN28258966].

"The market is gaining increasing confidence the strain in the financial markets and high oil prices will not tip the economy into a recession," said Jim Awad, chairman of W.P. Stewart & Co. Ltd. in New York.

The Dow Jones industrial average .DJI rose 85.09 points, or 0.74 percent, to 11,587.60, while the Standard & Poor's 500 Index .SPX gained 9.00 points, or 0.70 percent, to 1,290.66. The Nasdaq Composite Index .IXIC was up 12.69 points, or 0.53 percent, at 2,395.15.

Financial shares rose amid optimism about mortgage finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N). after Fannie announced management changes in an effort to better implement a plan to preserve capital and cut losses.

The management shake-up "shows that Fannie Mae is trying to get the ship moved in the right direction," said Arthur Hogan, chief market analyst at Jefferies & Co.

On Thursday Lehman Brothers LEH.N said Fannie's capital and reserves positions are better than market perceptions, adding that it may not need more externally raised capital.

Fannie shares rose 7.4 percent to $6.99. Freddie shares rose 10.1 percent to $5.25. The S&P financials sub-index .GSPF rose 1.2 percent.

Also helping financial services companies, bond insurer MBIA Inc (MBI.N) said late on Wednesday that it plans to reinsure a $184 billion portfolio of investment-grade U.S. public finance credits. Shares of MBIA rose 17.6 percent to $14.05.

Upscale U.S. jeweler Tiffany & Co (TIF.N) shares rose 8.7 percent to $43.14 after it posted a higher-than-expected profit and raised its full-year forecast on strong sales overseas.