U.S. stocks gained for a third day on Thursday on relief that S&P cut General Electric's ratings by just a single notch and signaled no further downgrades loomed, while data suggested some stabilization in consumer spending.

GE shares jumped about 12 percent after Standard & Poor's ratings service lowered its credit rating one notch to 'AA+' -- just one level below the top 'AAA' rating -- and assigned a stable outlook. Investors had feared the credit rating downgrade would be deeper or the outlook negative.

Wal-Mart Stores Inc , up 3 percent at $48.89, ranked among the Dow's top advancers following a government report that showed sales at U.S. retailers fell by an unexpectedly small margin in February.

It's a combination of better-than-expected retail sales and the GE news, said Cleveland Rueckert of Birinyi Associates in Stamford, Connecticut. A lot of things are priced for the apocalypse, but they're not quite that bad.

Investor sentiment was also lifted by news of a takeover in the biotechnology sector, driving up shares of health-care companies. An S&P health-care sector index <.GSPA> rose 4.2 percent.

The Dow Jones industrial average <.DJI> rose 152.20 points, or 2.20 percent, to 7,082.60. The Standard & Poor's 500 Index <.SPX> gained 16.99 points, or 2.36 percent, to 738.35. The Nasdaq Composite Index <.IXIC> added 27.51 points, or 2.01 percent, to 1,399.15.

GE, among the Dow's major gainers, was up 11.8 percent at $9.49 at midday. For the year to date, though, GE's stock price is down 41 percent.

A higher finish on Thursday would mark the S&P 500's first three-day run-up in more than a month. The Dow industrials could close above the 7,000 level for the first time since February 27.

Even so, caution about the labor market kept gains in check as weekly jobless claims data showed a record high number of workers drawing unemployment benefits as the recession takes its toll.

Shares of big manufacturers like Caterpillar and Boeing were among the major ones dragging on the Dow and curbing its gains.

But the financial sector provided another top boost to the Dow, with Bank of America up 10.8 percent at $5.46, just after hitting a session high at $5.48, and JPMorgan up 6.3 percent at $21.68. The KBW banks index <.BKX> shot up almost 5 percent.

On Nasdaq, biopharmaceutical company Gilead Sciences Inc said it will buy CV Therapeutics Inc for about $1.4 billion, stepping in the middle of a hostile bid for CV from Japan's Astellas Pharma Inc.

Gilead shares fell 1.7 percent to $43.29, while CV's shares soared 28.1 percent to $20.50.

Shares of peer Celgene Corp rose 11.3 percent to $46.98, placing it among the stocks contributing the most to the Nasdaq's advance. Celgene was the top gainer in the S&P 500 health-care index.

Shares of General Motors surged 12.4 percent to $2.09 after the automaker said that it will not immediately need $2 billion in emergency funding for March. Shares of Ford Motor added 6.6 percent to $2.09.

U.S. front-month crude oil climbed 5 percent, or $2.15, to $44.48 per barrel. Exxon Mobil Corp shares rose 1.2 percent to $66.57.

(Additional reporting by Deepa Seetharaman; Editing by Jan Paschal)