Stocks Claw Their Way Back as Oil Tops $104

Stocks clawed their way back to close higher Wednesday after a rollercoaster day of trading loaded with news.

The Dow Jones Industrial Average, Nasdaq and S&P 500 Index all eked out modest gains.

A better-than-expected reading on the services sector, an encouraging outlook from Cisco's CEO and new highs for several commodities spurred buying, while disappointment in an announcement from Ambac triggered selling.

Energy stocks advanced as oil jumped above $104 a barrel following a report that the U.S. crude supply declined.

The S&P 500 energy index climbed 1.3 percent.

BP rose 2.6 percent and Chevron , the Dow's biggest gainer, advanced 2.4 percent.

U.S. crude stockpiles dropped by 3.1 million barrels last week, the EIA reported. Analysts had expected a 2.4-million increase. OPEC decided to leave output unchanged, as expected.

Weakness in the dollar also spurred highs in a slew of commodities, including copper, silver, gold and heating oil.

Ambac shares plunged 19 percent after the bond insurer announced plans to raise up to $1.5 billion in capital in an attempt to keep its crucial triple-A debt rating. The effort will include a public offering of common stock to raise up to $1 billion and a private offering of equity units to raise up to $500 million, the bond insurer said.

The news, which had been agonizingly anticipated by the market for about a week, came as somewhat of a disappointment as investors had hoped for more of a contribution from global banks. Now it begs the question, Who will buy the shares?

Shares of rival MBIA declined 6.2 percent.

"We got some news that Ambac is going to do something to help keep themselves afloat, which of course, everybody takes as positive," Robert Heller, managing director of Chapdelaine Brokerage, told CNBC. The market was enthused about Ambac reissuing some stock, but Heller points out that shares are down around $9 from $90 last year, and the company will "have to sell an awful lot of shares this year to make up for the same amount as last year." When you consider that, Heller said, "I think it's not going to be enough."

"There is no quick fix," added Jeff Macke of CNBC's "Fast Money." And the market's response was that "to the extent that they're selling you something, they're lying to you," Macke said.

Financials Lead Dow Decliners

The Dow's three biggest decliners were financials: AIG , Bank of America and J.P. Morgan .

The S&P 500 financial index fell nearly 1 percent, making it the biggest decliner among 10 key S&P sector indexes, as investors continue to be worried about how much more the global credit crisis will hurt financial companies.

Recent speculation about more write-downs at Citigroup only piled on to the concern.

Citigroup CEO Vikram Pandit sent a memo to employees Wednesday, responding to a Dubai investor's comment Tuesday that the banking giant still needed more capital from the outside.

"While we face a challenging economic environment in many segments of our operation, fundamentally we remain strong," Pandit wrote. "Citi is financially sound -- we are well capitalized and extremely focused on the strength of our balance sheet."

Offering some cause for optimism in the financial sector earlier in the session, Morgan Stanley upgraded its rating on Fannie Mae , the largest provider of funding for U.S. home loans, to "equal weight" from underweight," saying it expects results for both Fannie Mae and Freddie Mac to be "significantly stronger" in 2009.

Economic news was mixed.

Not surprisingly, Federal Reserve districts reported decelerating economic growth in early 2008, even as most reported increased prices, according to the Fed's beige book, so named for the color of its cover.

On the upside, the ISM reported its nonmanufacturing index, which measures the performance of the services sector, rose to 49.3 for February from 44.6 in January; anything below 50 points to contraction in the sector. The services sector accounts for 80 percent of the economy.

Factory orders fell 2.5 percent in January, the first decline since August, the Commerce Department reported. Private employers slashed 23,000 jobs from their payrolls in February, according to ADP. U.S. nonfarm productivity grew at a 1.9 percent annualized rate in the fourth quarter, the Labor Department said, up from the prior estimate of a 1.8 percent pace.

Intel and Pfizer were in focus as both held analyst meetings today.

Pfizer , which is grappling with generic competition for many of its products, is turning to Asia and emerging markets to drive growth, the company said in a press release ahead of its meeting with analysts. The world's largest drug maker also plans to set up a new unit focusing on cancer drugs.

Analysts said details of Pfizer's strategy outlined by executives failed to soothe their concerns about flat revenue and a lack of new blockbuster drugs.

Intel rattled techs on Tuesday, lowering its gross margin forecast for the current quarter, citing falling prices of flash-memory chips used in portable electronic devices such as digital cameras and MP3 players. Several analysts cut their price targets on the stock.

During the analyst meeting Wednesday, Intel CEO Paul Otellini said price erosion for some chips is nearly twice what the company had expected. 

Yahoo advanced after the company said it will extend the deadline for nominating board members, a move to buy more time and explore alternatives to Microsoft's $41 billion offer for the Internet company. Microsoft