US STOCKS-Wall St jumps with energy shares as oil rallies

* Staples (NasdaqGS: SPLS - news) , Office Depot (NasdaqGS: ODP - news) in advanced merger talks - WSJ

* Strong auto sales add to bullish sentiment

* Indexes up: Dow 1.4 pct, S&P 0.9 pct, Nasdaq 0.5 pct (Updates to afternoon, changes byline)

By Caroline Valetkevitch

NEW YORK, Feb 3 (Reuters) - U.S. stocks jumped on Tuesday, led by gains in energy shares as oil prices extended their recent rally, while higher-than-expected January car sales added to the upbeat tone.

Merger activity also helped equities, with shares of Office Depot jumping 19.9 percent after the Wall Street Journal reported it was in advanced talks to merge with Staples Inc . Staples shares jumped 10.5 percent.

The S&P 500 is up about 2 percent over the past two sessions after suffering its biggest monthly drop in a year in January, but the index remains locked in its trading range of only about 120 points since mid-December and is down 0.9 percent since the start of 2015.

The year so far has been marked by days of high volatility, with the S&P 500's trading range often more than double its average over the past year.

U.S. crude oil prices rose 7 percent to settle at $53.05 . Brent and U.S. oil prices have risen roughly 19 percent since Wednesday's close. The S&P 500 energy index was up 2.3 percent on the day. Shares (Berlin: DI6.BE - news) of Exxon Mobil (Swiss: XOM.SW - news) were up 2.8 percent, while Chevron (Swiss: CVX.SW - news) was up 3.4 percent.

"You've seen shorts taking positions out of oil and removing some of the pressure on the commodity itself. With that, you've had more of an equity risk-on mentality," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

At 2:37 p.m., the Dow Jones industrial average rose 233.95 points, or 1.35 percent, to 17,594.99, the S&P 500 gained 18.47 points, or 0.91 percent, to 2,039.32 and the Nasdaq Composite added 23.54 points, or 0.5 percent, to 4,700.22.

January car sales by the three Detroit automakers topped expectations, buoyed by low gas prices and easy credit. Ford Motor gained 2.7 percent to $15.68, General Motors (NYSE: GM - news) rose 3 percent to $34.10 and Fiat Chrysler climbed 2 percent to $13.77.

Stratasys (Xetra: A1J5UR - news) shares plunged 30.3 percent after the 3D printer maker cut its 2014 adjusted profit estimates for a second time.

Advancing issues outnumbered declining ones on the NYSE by 2,321 to 731, for a 3.18-to-1 ratio; on the Nasdaq, 1,856 issues rose and 876 fell for a 2.12-to-1 ratio.

The benchmark S&P 500 was posting 17 new 52-week highs and no new lows; the Nasdaq Composite was recording 57 new highs and 33 new lows. (Editing by Bernadette Baum and Nick Zieminski)