* Yellen, Dudley comments boost dollar, Treasury yields
* Stocks end lower after data, Fed hints at Dec. rate hike
* Energy sector stocks reverse course as oil prices drop (Updates with U.S. market close, adds commentary)
By Sinead Carew
NEW YORK, Nov 4 (Reuters) - Wall Street stocks ended down on Wednesday as energy stocks turned lower on a drop in oil prices and two Federal Reserve officials said U.S. economic strength could justify a December interest rate hike.
The U.S. dollar hit an almost three-month high and U.S. Treasury yields soared after the Fed comments, building on a rise from unexpectedly strong private-sector U.S. job growth and other data that reflected well on the world's largest economy.
Yellen told Congress the Fed expects the economy to continue to grow at a pace that returns inflation to policy-makers' target and that "if the incoming information supports that expectation ... December would be a live possibility" for a rate increase at the Fed's next policy-setting meeting.
U.S. stocks took dive a after Yellen's comments, and then New York Fed President William Dudley agreed with Yellen. While a rate hike should signal economic strength, traders often balk at the prospect as higher rates can make equities less attractive than bonds to some investors and would raise borrowing costs.
Along with the rate hike comments, the market is consolidating a massive rally, said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
"The gains have been strong over the past five weeks and we're due for more of a breather here," said O' Rourke.
The Dow Jones industrial average fell 50.57 points, or 0.28 percent, to 17,867.58, the S&P 500 lost 7.48 points, or 0.35 percent, to 2,102.31 and the Nasdaq Composite dropped 2.65 points, or 0.05 percent, to 5,142.48.
U.S. two-year Treasury note yields hit 0.8200 percent, their highest since April 2011. Three-year yields hit 1.1484 percent, their highest in four months, while five-year yields hit 1.6520 percent, their highest in roughly three months.
"You hear from Yellen that if data is good, December is certainly on the table, and the data today I think supported the fact that the economy seems to be doing fine," said Priya Misra, head of global rate strategy at TD Securities in New York.
U.S. private employers maintained a steady pace of hiring and added more jobs than expected in October, and the trade deficit hit a seven-month low in September as exports rebounded while a jump in new orders buoyed activity in the services sector.
The U.S. dollar index was up 0.8 percent and earlier hit its highest since against Aug. 7. The euro was down almost 1 percent against the dollar.
The S&P 500's drop was led by a 1 percent decline in the energy sector that ended a five-day rally as oil prices fell.
Oil futures erased much of Tuesday's gains as the dollar strengthened, gasoline prices tumbled and U.S. crude inventories rose. Also an internal OPEC document seen by Reuters showed weaker oil demand in the next few years, even as Saudi Arabia pumped near record levels to protect market share.
Brent crude futures were down 3.9 percent at $48.58 a barrel, while U.S. crude settled down 3.3 percent $46.32.
Gold fell to its lowest in more than a month at $1,106 an ounce in its sixth straight session of losses as a rising dollar and talk of a near-term hike in U.S. rates kept it under pressure.
The FTSEurofirst 300 index of major companies rose 0.5 percent, after reaching its highest point since Aug. 19. (Additional reporting by Caroline Valetkevitch, Sam Forgione and Dion Rabouin in New York; Editing by Richard Chang and James Dalgleish)