The commodity market spread some holiday cheer on Wall Street Wednesday in the final full trading day before the Christmas break. 

Crude oil rocketed higher, lighting a fire under the energy sector, on welcome signs of slowing production in the U.S. and forecasts of higher prices in the long-term. West Texas Intermediate climbed 3.8% to $37.50 a barrel.

Oil prices have rebounded in recent days as investors became assured that the drop in crude was the result of stepped-up production rather than weakeness in the global economy. 

"The rout in oil and commodity prices has been due to oversupply and not falling demand," said Scott Wren, senior global equity strategist at Wells Fargo. "Global demand for oil and commodities in general continues to climb modestly, but over the past 10 years too much capacity was added as producers thought the emerging world (mostly China) would continue to see economic growth in excess of 10 percent far into the future."

Earlier, the Energy Information Administration reported an unexpected drop in crude inventories in the U.S. The weekly read on stocks showed crude inventories decline by 5.9 million barrels in the week ended Dec. 18. Prices were already higher after the Organization of Petroleum Exporting Countries predicted its basket of crudes would increase to $70 a barrel in 2020 and $95 a barrel in 2040. 

The S&P 500 closed 1.2% higher on Wednesday, the Dow Jones Industrial Average rose 1.1%, or 185 points, and the Nasdaq gained 0.9%. The rally was enough for the S&P 500 to return to positive territory for the year.

The energy sector was the best performer on markets Wednesday. Major oilers including Exxon Mobil (XOM) - Get Report , Chevron (CVX) - Get Report , Kinder Morgan (KMI) - Get Report , Halliburton (HAL) - Get Report , and BP (BP) - Get Report moved higher, while the Energy Select Sector SPDR ETF (XLE) - Get Report climbed 4.3%.

It was a busy day of economic data as several releases were packed in to accommodate the shortened week. New home sales in the U.S. rose 4.3% in November to a seasonally adjusted annual rate of 490,000, though missed estimates of 505,000. 

Durable goods orders were unchanged in November, beating estimates of a 0.5% contraction. Excluding transportation, durable orders fell 0.1%. Core orders have fallen 1.8% over the past 12 months.

Consumer spending in the U.S. rose in November as American shoppers began their holiday season over the Black Friday weekend. Spending increased 0.3%, according to the Commerce Department. The release had inadvertently been released more than 12 hours ahead of schedule.

"Consumers appear increasingly willing to ramp up purchases of goods and services near the end of the year," wrote Lindsey Piegza, chief economist at Stifel, in a note. "For the [Federal Reserve], however, this morning's report comes as a double edged sword ... Inflation remains sluggishly low offering little confidence that prices are trending back towards the Committee's longer term objective of 2%.

The final University of Michigan Sentiment Index for December rose to 92.6 from 91.3. Estimates called for the index to rise to 92.0.

Volume was lower than normal with many investors clocking out early for the holidays. The total number of shares traded on the S&P 500 reached 325 million, well below its three-month daily average of nearly 700 million. Wall Street will close at 1 p.m. EST on Thursday for Christmas Eve and be closed on Friday for Christmas.

In other stock news, Apple (AAPL) - Get Report shares were up 1.3% even after FBR & Co. analysts cut their price target and expectations for iPhone shipments. The firm said recent data showed weaker demand. Analyst Daniel Ives retained his "outperform" rating, but his stock price target was reduced to $150 from $175.

Micron Technology (MU) - Get Report fell 2.1% after reporting weaker revenue in its recent quarter. The semiconductor company suffered from lower prices on softer demand for chips. Micron earned 24 cents a share, a penny above estimates.

Bed, Bath & Beyond (BBBY) - Get Report fell more than 4% after cutting quarterly guidance. The homewares retailer said it expects earnings of $1.07 to $1.10 a share, lower than a previous range of $1.14 to $1.21. The company said the revision was due to lower-than-expected sales.

Drugmaker Shire (SHPG) - Get Report made a new acquisition offer for Baxalta International (BXLT) roughly in line with Baxalta's valuation expectations. Baxalta had rejected an all-stock offer from Shire in August, arguing it undervalued the company. A deal is likely in coming weeks, according to Reuters.