On Wall Street, oil delivers modest Santa Claus rally

By Noel Randewich

(Reuters) - Wall Street rallied for the third straight session on Wednesday, led by sharp gains in energy stocks as a rebound in oil prices boosted sentiment heading into the Christmas holiday.

Crude prices climbed after U.S. inventories fell but still hovered near multi-year lows as oversupply concerns continued to weigh. [O/R]

The S&P energy sector <.SPNY> surged 3.44 percent and led the 10 major sectors on the index by a solid margin. Exxon shares rose 2.59 percent, while Chevron gained 3.02 percent, providing the biggest boost to the Dow.

After a soft start to December, the S&P 500 has gained 2.66 percent this week, leaving the index essentially unchanged in 2015.

"There is a bit of a Santa Claus rally here. People want to feel good, they want to dress up their portfolios and look fully invested going into yearend," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

At 1:45 p.m. ET (1845 GMT) the Dow Jones industrial average was up 0.78 percent at 17,552.63 points. The S&P 500 had gained 0.98 percent to 2,058.86 and the Nasdaq Composite was up 0.66 percent at 5,034.19.

U.S. stock markets will have a shortened session on Thursday and stay closed on Friday for Christmas. Trading volumes are expected to remain thin through the holiday period.

Data indicated the outlook for the economy remained encouraging, with consumer sentiment at a five-month high in December and personal income rising for the eighth straight month in November.

However, non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell last month as a stronger dollar and spending cuts dragged.

Celgene rallied 10.20 percent after the drugmaker said it settled a patent litigation over its top-selling cancer drug, Revlimid. The stock gave the biggest boost to the S&P and Nasdaq.

Nike reversed early gains and was down 2.6 percent. The stock hit a record high earlier in the day after the world's largest sportswear maker reported strong results.

Micron shares dropped 3.83 percent after the memory chip maker forecast a surprise loss for the second quarter.

Bed Bath & Beyond fell 4.7 percent after the home furnishings retailer cut its third-quarter profit forecast.

Advancing issues outnumbered decliners on the NYSE by 2,564 to 473. On the Nasdaq, 1,972 issues rose and 811 fell.

The S&P 500 index showed 11 new 52-week highs and two new lows, while the Nasdaq recorded 32 new highs and 43 new lows.

(Additional reporting by Abhiram Nandakumar and Ankur Banerjee in Bengaluru; Editing by Meredith Mazzilli)