* Bellwether stocks up on optimism over 2011 prospects
* Retailers gain on BJ's Wholesale buyout report
* Molycorp gains on China rare earth export decision
* Indexes: Dow, S&P up 0.1 pct, Nasdaq up 0.2 pct
(Updates to close)
By Ryan Vlastelica
NEW YORK, Dec 29 (Reuters) - The S&P 500 headed for its best December in nearly two decades as U.S. stocks advanced in thin trade on Wednesday, lifted by investor optimism about the economy in 2011.
The S&P has gained 6.8 percent so far this month and rose in 17 of the last 20 sessions. However, with volume among the lowest of the year because of the holidays and scarce economic news, some investors are waiting for January to see if the rising pattern holds.
"I don't want to dismiss the recent gains, but I'm not ready to draw a trend line," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "I'd like to see how the market responds when we have more participants and tangible news to sink our teeth into."
The S&P, which has already passed the level on Sept. 12, 2008 just before Lehman Brothers collapsed, is on course for its biggest December gain since 1991 when it rose 11.2 percent.
A number of major consumer-linked shares posted solid gains on Wednesday, with McDonald's Corp up 1.1 percent to $77.27 and Walt Disney Co up 0.9 percent to $37.69. Both companies are Dow components.
"People are hoping that the consumer is back and that will help fuel the engine and grow some earnings, so that companies will start hiring," said Frank Ingarra, a portfolio manager at Hennessy Funds in Stamford, Connecticut.
The Dow Jones industrial average was up 10.52 points, or 0.09 percent, at 11,586.06. The Standard & Poor's 500 Index was up 1.34 points, or 0.11 percent, at 1,259.85. The Nasdaq Composite Index was up 4.05 points, or 0.15 percent, at 2,666.93.
Advancing stocks outnumbered declining ones on the New York Stock Exchange by a ratio of almost two to one, while on the Nasdaq, about seven stocks rose for every six that fell.
"There's not much conviction behind any of the moves we've seen lately, though there is an upward bias because of window dressing," Ablin said, referring to money managers' year-end trading. "For the rest of the year we should see people trying to fill in around the edges to make their portfolios look better."
BJ's Wholesale Club Inc jumped 7.1 percent to $47.63 after the New York Post reported buyout firm Leonard Green & Partners remained interested in buying the warehouse club operator and that it may launch a hostile bid.
The Morgan Stanley Retail index climbed 0.8 percent while the S&P Retail index gained 0.3 percent.
Sears Holdings Corp rose 6.4 percent to $74.49 after it said it launched an on-demand video service to compete with companies like Netflix Inc.
The online movie renter's stock fell 1.9 percent to $180.27 but is up more than 200 percent this year.
Molycorp Inc, which owns a rare-earth mine in Mountain Pass, California, rose 6.8 percent to $49.34 after China reduced quotas for exporting the minerals, thus threatening to reduce already tight global supplies.
U.S.-listed shares of Brazilian oil firm Petrobras gained 4.9 percent to $25.89 after it said its reserves could rise significantly due to two deep-water oil fields.
Noble Energy Inc and its Israeli exploration partners confirmed earlier estimates that the offshore Leviathan prospect was Israel's largest natural gas find. Noble rose 2.6 percent to $87.16.
(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)