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* S&P and Dow set to snap 3-day losing streak
* Feb U.S. manufacturing, consumer sentiment miss view
* Foot Locker jumps on Q4 same-store sales beat
* Indexes up: Dow 0.28 pct, S&P 0.41 pct, Nasdaq 0.58 pct (Adds comments, details, updates to early afternoon)
By Shreyashi Sanyal
March 1 (Reuters) - The S&P 500 and the Dow Jones IndustrialAverage rose on Friday after three days of losses, lifted byoptimism on trade and upbeat economic data from China, but gainswere capped by downbeat U.S. manufacturing and consumer reports.
A private survey showed China's factory activity contractedfor a third straight month in February but at a slower pace,indicating a marginal improvement in domestic demand as a flurryof policy stimulus kicked in from late last year.
The figures were more upbeat than the official Chinese PMI survey on Thursday that also showed new orders expanding andcomes after a stronger-than-expected growth in U.S. grossdomestic product in the fourth quarter.
"Certainly trade optimism is a driver for the markets rightnow. If China data continues to improve, that will start to putpeople's minds at ease about whether China is in recession,"said Michael Antonelli, market strategist at Robert W. Baird inMilwaukee.
However, ISM data showed U.S. manufacturing activity forFebruary dropped to its lowest since November 2016 and theUniversity of Michigan survey showed consumer sentiment fellshort of expectations in the month.
"At this point a little bit of a wet blanket is thrown overthe rally, based on the U.S. economic data," Antonelli said.
The benchmark S&P 500 .SPX index has risen 11.5 percentthis year, bolstered by progress in trade talks and the FederalReserve's cautious stance on interest rates.
Of the 11 major S&P 500 sectors, six were higher. Thehealthcare sector .SPXHC rose 1.1 percent, providing thebiggest boost, supported by gains in health insurers Cigna CorpCI.N and UnitedHealth GroupUNH.N .
The consumer discretionary sector .SPLRCD rose 0.62percent, lifted by a 6.2 percent jump in shares of Foot LockerFL.N .
The footwear retailer beat quarterly same-store salesestimates and helped drive a 1.8 percent gain in supplier NikeInc NKE.N shares.
At 12:58 p.m. ET the Dow Jones Industrial Average .DJI wasup 71.36 points, or 0.28 percent, at 25,987.36, the S&P 500 .SPX was up 11.51 points, or 0.41 percent, at 2,796.00 and theNasdaq Composite .IXIC was up 43.60 points, or 0.58 percent,at 7,576.14.
After President Donald Trump delayed a deadline that wouldhave triggered higher tariffs on Chinese imports, Bloombergreported on Thursday afternoon that a summit between Trump andhis Chinese counterpart Xi Jinping to sign a final trade dealcould happen as soon as mid-March.
Among other stocks, Gap IncGPS.N surged 18.3 percent, themost on the S&P, after the company said it would separate itsbetter-performing Old Navy brand and shutter about 230 stores ofits struggling namesake apparel business.
Drug retailer Walgreens Boots Alliance IncWBA.O 6.4percent, the most on the S&P. Brokerage Baird cut its pricetarget.
A Commerce Department report showed inflation pressuresremaining tame, which along with slowing domestic and globaleconomic growth, gave more credence to the Federal Reserve's"patient" stance towards raising interest rates further thisyear.
Advancing issues outnumbered decliners by a 1.46-to-1 ratioon the NYSE and by a 1.67-to-1 ratio on the Nasdaq.
The S&P index recorded 46 new 52-week highs and no new low,while the Nasdaq recorded 75 new highs and 27 new lows. (Reporting by Shreyashi Sanyal and Medha Singh in Bengaluru;Editing by Anil D'Silva and Sriraj Kalluvila) ((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780 ;Reuters Messaging:Shreyashi.Sanyal.firstname.lastname@example.org))