(Fixes typo in word ‘Arizona’ in fourth paragraph)
* Starboard Value takes stakes in Office Depot, Staples
* Initial claims fall, retail sales top expectations
* Indexes up: Dow 0.73 pct, S&P 0.91 pct, Nasdaq 0.97 pct
By Chuck Mikolajczak
NEW YORK, Dec 11 (Reuters) - U.S. stocks rose on Thursday, bouncing sharply from a three-day drop as data pointed to a strengthening economy that appeared likely to weather the impact of a steep drop in oil prices.
The benchmark S&P index dropped more than 1 percent on Wednesday and had shed 2.4 percent over the prior three sessions, it’s worst run in two months, as weakness in oil prices has weighed heavily on the energy sector.
But the weakness in oil has helped consumer holiday spending, with retail sales data for November beating expectations. The S&P retail index jumped 1.6 percent, lifted by a 1.4 percent climb in Home Depot to $100.36.
“We are starting to get some metrics around the energy and we are seeing that one ‘X’ factor of will consumers spend this extra money?” said Sean McCarthy, regional CIO for Wells Fargo Private Bank in Scottsdale, Arizona.
“And in the holiday season they are (spending), and more so.”
Falling oil prices have added to worries about global demand and raised concerns about earnings for energy companies, with year-end tax selling putting additional pressure on the group. The sector is down 14.7 percent for the year and is the worst performing of the 10 major S&P sectors.
Brent crude, down more than 40 percent from its June high, briefly managed to climb back above the $65 mark only to reverse course and last traded flat at $64.24. WTI crude shed 0.3 percent to $60.73.
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.
The data may influence investors’ expectations on whether the Fed will adjust its language to keep interest rates near zero for a “considerable time” when policymakers meet next week.
The Dow Jones industrial average rose 128.37 points, or 0.73 percent, to 17,661.52, the S&P 500 gained 18.49 points, or 0.91 percent, to 2,044.63 and the Nasdaq Composite added 45.39 points, or 0.97 percent, to 4,729.42.
At 10:00 a.m. (1500 GMT), business inventories data for October is expected.
Lululemon Athletica jumped 10.3 percent to $51.52 after the maker of yoga apparel posted quarterly results.
Staples Inc jumped 8.8 percent to $16.12 and Office Depot climbed 10.8 percent to $7.45 after Activist investor Starboard Value LP disclosed stakes in both office-supply retailers in a move that could set up a potential merger.
Advancing issues outnumbered declining ones on the NYSE by 2,223 to 536, for a 4.15-to-1 ratio; on the Nasdaq, 1,834 issues rose and 477 fell for a 3.84-to-1 ratio favoring advancers.
The benchmark S&P 500 index was posting 16 new 52-week highs and 8 new lows; the Nasdaq Composite was recording 33 new highs and 21 new lows.
Editing by Bernadette Baum