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* S&P 500 on pace for best three-day run since January
* Market lauds remarks by Fed's Dudley
* ConAgra jumps after raising its outlook, PayChex drops
* Indexes up: Dow 0.9 pct, S&P 0.9 pct, Nasdaq 1 pct
By Alison Griswold
NEW YORK, June 27 (Reuters) - U.S. stocks rose for a third straight day on Thursday as comments from several Federal Reserve officials eased fears that the central bank would begin to reduce its stimulus efforts in the near future.
The S&P 500 was on track for its best three-day run since January, bolstered by economic data showing a decline in weekly jobless claims and improvements in consumer spending and income.
While the S&P remains more than 3 percent below its all-time closing high of 1669.16 reached on May 21, it has rallied 2.7 percent over the past three sessions.
"The market continues to be trader-directed and it is completely based on sentiment -- how do traders feel today, tomorrow," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
Stocks have been volatile since Fed Chairman Ben Bernanke said last week the central bank could begin to reduce its $85 billion in monthly bond purchases later this year and end the program altogether by mid-2014 if economic conditions improve.
Wall Street has been closely tied to the direction of the Fed's stimulus program, which is credited with fueling the stock market's 13-percent jump in 2013, and uncertainty over the timing of a pullback caused the market to dip 4.8 percent in the days following Bernanke's remarks.
"We're in the midst of a one-way market," James said. "When things are bad, the market's going down and buyers are moving to the sidelines. When things are good, the market's going up and sellers are moving to the sidelines."
William Dudley, president of the Federal Reserve Bank of New York, said 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 slowing the pace of the Fed's bond buying would depend not on calendar dates but on the economic outlook, which remained unclear.
Atlanta Federal Reserve Bank President Dennis Lockhart echoed Dudley's comments, saying the pace of the Fed's purchases remained contingent on evolving economic conditions.
The Dow Jones Industrial Average rose 138.55 points or 0.93 percent, to 15,048.69, the S&P 500 gained 14.31 points or 0.89 percent, to 1,617.57 and the Nasdaq Composite added 33.57 points or 0.99 percent, to 3,409.8.
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 rose 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.
In corporate news, ConAgra Foods Inc rose 5.5 percent to $35.20 as the third-best performer on the S&P 500 after the food manufacturer reported a quarterly profit slightly above Wall Street's estimates and raised its long-term outlook. Time Warner Cable was the S&P 500's best performer, rising 8.1 percent before trimming the advance to 5.6 percent equal to $109.41
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 0.6 percent to $14.87 and Freeport-McMoRan Copper & Gold added 1.3 percent to $27.21. The NYSE Gold Bugs Index climbed 0.6 percent to $208.13.
On the downside, PayChex was the S&P 500's biggest percentage decliner after reporting results, losing 4.6 percent to $36.26.