US STOCKS-Wall St rallies on oil pullback, data

* Pullback in oil prices buoys sentiment

* Services sector shrinks, but less than expected

* Fed set to decide on rates, policy statement eyed

* Procter & Gamble beats estimates, stock higher (Updates to early morning)

By Ellis Mnyandu

NEW YORK, Aug 5 (Reuters) - U.S. stocks rebounded on Tuesday as investors bet that sharply lower oil prices and data showing moderating inflation pressures would strengthen consumer and business spending and improve the outlook for profits.

Investors snapped up shares broadly, but particular strength was evident in energy-consuming sectors, including airlines and industrial companies. Shares of retailers, tech and financial services companies also gained.

Manufacturer General Electric (GE.N) gained more than 2 percent and was the biggest boost to the S&P 500. Insurer American International Group (AIG.N) rose more than 5 percent to lead the Dow's climb, while on Nasdaq, the top boost was Apple Inc (AAPL.O), up almost 2 percent.

U.S. crude oil futures CLc1 fell to three-month lows.

"I think that oil getting to the $120 level maybe that was the trigger to cause some buying," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

He also said investors were relieved that the Institute for Supply Management said an index showed a smaller-than-expected contraction in the vast services sector of the economy in July. The report included a decline in the prices paid index.

The Dow Jones industrial average .DJI rose 153.96 points, or 1.36 percent, to 11,438.11. The Standard & Poor's 500 Index .SPX gained 16.14 points, or 1.29 percent, to 1,265.15. The Nasdaq Composite Index .IXIC jumped 26.72 points, or 1.17 percent, to 2,312.28.

U.S. crude fell 1.4 percent to $119.75 a barrel on the New York Mercantile Exchange. Receding energy prices are a welcome boost as Federal Reserve policy-makers met on Tuesday to decide interest-rate policy and give their assessment of the U.S. economy.

The Fed is widely expected to keep interest rates unchanged at 2 percent, but investors will scrutinize its policy statement expected around 2:15 p.m. (1815 GMT) for hints about the future direction of rates in coming months.

GE shares rose to $28.78 on the New York Stock Exchange, while shares of AIG jumped to $28.14.

On Nasdaq, Apple shares climbed to $156.34. According to theflyonthewall.com, UBS started Apple with a "buy" rating.

Among retailers, shares of Wal-Mart Stores (WMT.N) , the world's biggest retailer, rose 1.8 percent to $59.47, while those of Target Corp (TGT.N) gained 3.2 percent to $46.44.

Among airlines, shares of Continental Airlines CAL.N rose 4.6 percent to $14.90, as the airline index .XAL gained 4.1 percent.

Procter & Gamble Co (PG.N), the world's largest consumer products maker, posted a stronger-than-expected quarterly profit. Its stock rose 2.7 percent to $67.56 on the NYSE. (Additional reporting by Walter Brandimarte, Editing by Kenneth Barry)