NEW YORK (REUTERS) - Wall Street rallied in pre-holiday trading on Wednesday, helped by surging energy shares as an unexpected drop in crude oil inventories lifted beaten-down oil prices.

US Treasury yields rose and the dollar edged higher after a three-session losing streak, as investors digested mixed economic data.

With oil's 1-1/2-year slide worsening for most of this month, Wall Street's performance has been closely tied to the price of crude, raising some concerns that weakness in the commodity would derail typical year-end strength in stocks.

Benchmark Brent crude rose 3.6 per cent to US$37.41 a barrel, while US crude prices settled up 3.8 per cent at US$37.50 a barrel, although trading was thin.

U.S. crude inventories fell 5.88 million barrels to 484.78 million barrels last week, the Energy Information Administration said, compared with a forecast rise of 1.4 million barrels.

Shares of oil majors Exxon Mobil and Chevron each gained more than 3 percent, and the S&P energy sector jumped 4.2 per cent, its biggest one-day rise in about four months.

"It seems in the very short term here the market has been taking some cues from what is going on in oil, and so strength in oil today has probably been a plus," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

The Dow Jones industrial average rose 185.34 points, or 1.06 per cent, to 17,602.61, the S&P 500 gained 25.32 points, or 1.24 per cent, to 2,064.29 and the Nasdaq Composite added 44.82 points, or 0.9 per cent, to 5,045.93.

US stock indexes tallied their third straight day of gains after declining following the Federal Reserve's interest rate hike last week.

"The sell-off that we had coming into the Christmas week here is probably more than anything responsible for the bounce back," said Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis.

The pan-European FTSEurofirst 300 index rose 2.8 per cent. Mining stocks rallied, with Anglo American and Glencore each up more than 8 percent, helped by a 1.2 per cent rise in copper prices.

"Brent crude above US$35 per barrel and copper above US$2 per pound should be enough to fend off commodity sector bears into the year end," said Jasper Lawler, analyst at CMC Markets.

MSCI's all-country world stocks index rose 1.3 percent.

New orders for US manufactured capital goods fell in November and the prior month's increase was revised sharply lower. But other US data showed consumer sentiment at a five-month high in December and personal income rising for an eighth straight month in November.

US Treasury yields rose, with 30-year yields hitting one-week highs after the economic data supported views of a swift pace of Fed rate hikes next year and the oil price gains suggested higher inflation.

Benchmark 10-year US Treasury notes were down 6/32 in price to yield 2.264 per cent. "We've been in somewhat of a down cycle in economic numbers, and they are starting to gather a little bit of steam," said Ellis Phifer, market strategist at Raymond James in Memphis, Tennessee.

The dollar index, which measures the greenback versus a group of six currencies, inched up 0.06 per cent. "Higher US Treasuries yields is providing some support for the dollar," said Eric Viloria, currency strategist at Wells Fargo Securities in New York.

Spot gold edged down 0.3 percent in thin trade.