* U.S. consumer spending up in November
* Nike reverses course after hitting record high
* Celgene up after settling patent litigation
* Indexes up: Dow 0.85 pct, S&P 1.03 pct, Nasdaq 0.72 pct (Updates to early afternoon)
By Abhiram Nandakumar
Dec 23 (Reuters) - Wall Street rallied for the third straight day, led by sharp gains in energy stocks, as a rebound in crude oil prices boosted sentiment heading into the Christmas holidays.
Oil prices were up after U.S. inventories fell, but still hovered near multi-year lows as oversupply concerns continued to weigh.
The S&P energy sector rose 2.8 percent and led the 10 major sectors on the index by a wide margin. Exxon shares were up 1.9 percent at $79.09, while Chevron was up 2.4 percent at $92.36 and provided the biggest boost to the Dow.
"This is almost always a very good week for the market. The market rallies into Christmas," said Jeff Clark, trading analyst at Stansberry Research in Baltimore.
At 12:31 p.m. ET (1731 GMT), the Dow Jones industrial average was up 148.23 points, or 0.85 percent, at 17,565.5, the S&P 500 was up 20.99 points, or 1.03 percent, at 2,059.96 and the Nasdaq Composite index was up 35.97 points, or 0.72 percent, at 5,037.08.
U.S. stock markets will have a shortened session on Thursday and stay closed on Friday for Christmas. Trading volumes are expected to remain relatively light through the holiday period.
Data on Wednesday 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-defense 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 was up 10 percent at $122.23 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 pared early gains and was down 2.7 percent at $128.30. The stock hit a record high earlier in the day after the world's largest sportswear maker reported strong results.
Micron shares were down 4.9 percent at $13.91 in premarket trading after the memory chip maker forecast a surprise loss for the second quarter.
Bed Bath & Beyond was down 4.6 percent at $48.96 after the home furnishings retailer cut its third-quarter profit forecast.
Advancing issues outnumbered decliners on the NYSE by 2,628 to 389. On the Nasdaq, 2,017 issues rose and 716 fell.
The S&P 500 index showed 11 new 52-week highs and two new lows, while the Nasdaq recorded 31 new highs and 38 new lows. (Reporting by Abhiram Nandakumar and Ankur Banerjee in Bengaluru; Editing by Anil D'Silva)