US STOCKS-Wall St advances for third day after Dudley comments
* Initial claims dip, personal income and spending climb
* Market lauds remarks by Fed's Dudley; Lockhart to speak
* ConAgra jumps after raising its outlook, PayChex drops
* Indexes up: Dow 0.8 pct, S&P 0.8 pct, Nasdaq 0.9 pct
NEW YORK, June 27 (Reuters) - U.S. stocks climbed for a third straight day on Thursday as concerns receded that the Federal Reserve would begin to unwind its stimulus efforts earlier than expected.
A decline in weekly jobless claims and improvements in consumer spending and income added to the positive tone and contributed to the S&P 500's best three-day run since January.
Equities have been volatile ever since Fed Chairman Ben Bernanke said last week the central bank's bond-buying program, credited with fueling the market's 13-percent jump in 2013, would be reined in earlier than expected if economic conditions improve.
With Wall Street so closely tethered to the direction of Fed policy, uncertainty over the timing of a pullback to the program sparked a market decline of as much as 4.8 percent in the days following Bernanke's remarks.
"The Fed had to be shocked at how much of a move Bernanke's testimony generated ... so now it is trying to alter expectations," said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati.
William Dudley, head of the New York Federal Reserve, said Thursday the Fed's asset purchases would be more aggressive than the timeline Bernanke had outlined if U.S. economic growth and the labor market prove weaker than expected.
Dudley stressed that the timeline for slowing the pace of the Fed's bond buying would depend not on calendar dates but on the economic outlook, which remained unclear.
"The Fed got ahead of itself talking about tapering, since the data remains very mixed but consistent with the sub-par two percent growth trend," said Sargen, who helps oversee $45 billion. "The message now is that investors need to hang on."
Market participants will now turn their focus to impending comments from Atlanta Fed President Dennis Lockhart, who is due to speak on the economic outlook at 12:30 p.m. (1630 GMT).
Initial claims for state unemployment benefits dropped slightly less than expected in the latest week, to a seasonally adjusted 346,000. Analysts were looking for initial claims of 345,000.
A separate report showed consumer spending increased 0.3 percent last month while incomes grew 0.5 percent, the largest gain since February. Pending home sales rose 6.7 percent to their highest since December 2006.
The Dow Jones industrial average was up 121.26 points, or 0.81 percent, at 15,031.40. The Standard & Poor's 500 Index was up 12.76 points, or 0.80 percent, at 1,616.02. The Nasdaq Composite Index was up 29.42 points, or 0.87 percent, at 3,405.64.
While the S&P remains more than 3 percent below an all-time closing high reached in May, it has rallied 2.7 percent over the past three sessions.
In corporate news, ConAgra Foods Inc rose 5.4 percent to $35.14 as the best performer on the S&P 500 after the food manufacturer reported a quarterly profit slightly ahead of Wall Street estimates and raised its long-term outlook.
Bed Bath & Beyond Inc rose 0.2 percent to $70.15 a day after reporting better-than-expected first-quarter sales, though profits were below forecasts.
On the downside, PayChex and McCormick & Co were among the biggest percentage decliners on the S&P after reporting results. PayChex dropped 5.2 percent to $36.02 while McCormick lost 2.5 percent to $70.22.
Gold miner stocks advanced as prices of the precious metal edged higher following a 12-percent drop over the past eight sessions. U.S.-listed shares of Barrick Gold advanced 1.7 percent to $15.03 and the NYSE gold bugs index climbed 1.9 percent.