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* Headline CPI seen easing Tuesday
* Bristol Myers rises on FDA approval for psoriasis drug
* Twitter says Musk's latest attempt to scrap deal invalid
* Indexes up: Dow 0.71%, S&P 1.06%, Nasdaq 1.27% (Updates to market close)
By Stephen Culp
NEW YORK, Sept 12 (Reuters) - Wall Street extended its winning streak on Monday, rallying to a sharply higher close as investors awaited crucial inflation data that could provide clues about the duration and severity of the Federal Reserve's tightening policy.
Energy and technology shares helped the three major U.S. stock indexes touch two-week highs and notch their fourth straight session of gains, in which growth stocks were slightly favored over value.
The Labor Department's consumer price index (CPI), expected before Tuesday's opening bell, is this week's main event, and will be scrutinized for any signs regarding the number and size of future interest rate hikes from the Fed.
"CPI is expected to see a little bit of a decrease," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "The market is hoping that news translates into smaller rate hikes after the Sept FOMC meeting."
"Because of that, you're seeing a risk-on type of mentality today," Pavlik added.
On Thursday, Fed Chair Jerome Powell affirmed the central bank remains "strongly committed" to tackling decades-high inflation, and that it would "keep at it until the job is done."
Economists polled by Reuters expect monthly CPI to have contracted 0.1% in August from July, edging down to 8.1% year-on-year, mainly due to the recent cool-down of commodity prices.
Financial markets have currently priced in a 92% probability that the Federal Open Markets Committee (FOMC) will implement its third straight 75-basis-point interest rate hike at the conclusion of next week's policy meeting, according to CME's FedWatch tool.
"The market has now fully priced in 75 basis points for September," Pavlik said. "The market is hoping the next one is 50 basis points and that we'll see a slight decrease in rate hikes after that, and Wall Street can live with that."
The Dow Jones Industrial Average rose 229.63 points, or 0.71%, to 32,381.34, the S&P 500 gained 43.05 points, or 1.06%, to 4,110.41 and the Nasdaq Composite added 154.10 points, or 1.27%, to 12,266.41.
All 11 major sectors of the S&P 500 closed green. Energy companies, boosted by rising crude prices, enjoyed the biggest percentage gain.
Economically sensitive transports outperformed the broader market, while market-leading megacaps provided the most lift.
A 3.9% jump in Apple Inc shares gave the S&P 500 and the Nasdaq their biggest boost, days after the gadget maker unveiled updates to its iPhone and Apple Watch.
Drugmaker Bristol-Myers Squibb rose 3.1% following the Food and Drug Administration's approval of its psoriasis drug late on Friday.
Rival Amgen Inc, maker of psoriasis drug Otezla, slid 4.1%.
Twitter Inc ended the session down 1.8% amid its legal wrangling against Tesla Inc chief Elon Musk for scrapping a deal to acquire the social media platform.
Car selling platform Carvana Co hopped 15.5% higher following Piper Sandler's upgrade of the stock to "overweight."
Advancing issues outnumbered declining ones on the NYSE by a 3.37-to-1 ratio; on Nasdaq, a 1.78-to-1 ratio favored advancers.
The S&P 500 posted 11 new 52-week highs and no new lows; the Nasdaq Composite recorded 47 new highs and 59 new lows.
Volume on U.S. exchanges was 9.63 billion shares, compared with the 10.22 billion average over the last 20 trading days. (Reporting by Stephen Culp in New York; Additional reporting by Sinead Carew; Editing by Matthew Lewis and Cynthia Osterman)