(Updates to late afternoon)
* Starboard Value takes stakes in Office Depot, Staples
* Initial claims fall, retail sales top expectations
* Indexes up: Dow 0.9 pct, S&P 1 pct, Nasdaq 1.2 pct
By Caroline Valetkevitch
NEW YORK, Dec 11 (Reuters) - U.S. stocks bounced back on Thursday, with the S&P 500 surging more than 1 percent, as data pointed to a strengthening U.S. economy and boosted optimism about holiday spending.
The gains come after the S&P 500 shed 2.4 percent over the previous three sessions, the worst run for the benchmark index in two months, as weak oil prices weighed down the energy sector.
Still, lower oil prices likely encouraged consumer holiday spending, and retail sales data for November beat expectations. The S&P retail index jumped 1.7 percent, lifted by a 2 percent climb in Home Depot.
"It suggests overall spending is going to do well, and today's rally confirms the resumption of a year-end rally which probably will take the S&P to about 2,100," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
Other economic data showed a strengthening labor market, as weekly initial jobless claims dipped by 3,000 to an adjusted 294,000, while the drop in oil prices helped spur the biggest decline in U.S. import prices in 2-1/2 years.
Consumer discretionary shares and technology led gains on the S&P 500, with the S&P consumer discretionary index up 1.3 percent. Energy shares rebounded with Brent crude oil prices. The S&P energy sector, up 0.9 percent on the day, is down about 12 percent for the year so far.
Brent crude, down more than 40 percent from its June high, was last up 0.6 percent.
At 2:15 p.m., the Dow Jones industrial average rose 161.59 points, or 0.92 percent, to 17,694.74, the S&P 500 gained 21.23 points, or 1.05 percent, to 2,047.37 and the Nasdaq Composite added 57.13 points, or 1.22 percent, to 4,741.16.
The day's economic data may influence investors' expectations on whether the Federal Reserve will adjust its pledge to keep interest rates near zero for a "considerable time" when policymakers meet next week.
Among the day's biggest gainers was Urban Outfitters , up 9 percent. Lululemon Athletica jumped 9.6 percent after the maker of yoga apparel posted quarterly results.
Staples Inc jumped 6.5 percent and Office Depot climbed 11.3 percent after activist investor Starboard Value LP disclosed stakes in both office-supply retailers.
Advancing issues outnumbered decliners on the NYSE by 2,167 to 901, for a 2.41-to-1 ratio; on the Nasdaq, 1,915 issues rose and 792 fell for a 2.42-to-1 ratio.
The S&P 500 was posting 35 new 52-week highs and 10 lows; the Nasdaq Composite was recording 86 new highs and 64 lows. (Editing by Bernadette Baum and Nick Zieminski)