NEW YORK - US stocks rose on Wednesday as evidence the services sector may not be as weak as feared allayed investors' concerns about a recession and soaring commodity prices lifted energy and mining companies' shares.

Data on the US services sector, which makes up roughly 80 per cent of the economy, shrank less than expected, overshadowing a surprising decline in private-sector employment for February.

A startling drop in US oil supplies lifted crude futures to a record in New York, boosting shares of oil companies, including Chevron Corp, whose stock jumped 2.4 per cent.

Data from the Institute for Supply Management showing less deterioration in the vast services sector in February underpinned the market.

'It certainly is nice to see a bit of a bounce for a change,' said Mr Peter Jankovskis, director of research at OakBrook Investments LLC, in Lisle, Illinois, The report on the vast services sector from the Institute for Supply Management 'would suggest that there is some strength out there and, hopefully, the economy is beginning to re-accelerate,' he said.

The Dow Jones industrial average ended up 41.19 points, or 0.34 per cent, at 12,254.99. The Standard & Poor's 500 Index finished up 6.95 points, or 0.52 per cent, at 1,333.70. The Nasdaq Composite Index closed up 12.53 points, or 0.55 per cent, at 2,272.81.

Chevron shares ended at US$88.79 (S$123.34) on the New York Stock Exchange, and contributed the most to the gains of both the Dow and the S&P 500.

Shares of mining company Freeport McMoRan closed at US$104.08, while those of oil services company Schlumberger Ltd advanced 3.9 per cent to US$87.85.

US crude gained after Tuesday's sharp drop and Opec oil ministers left output unchanged, as expected. A report showed a large and unexpected drop in US supplies of crude. Crude oil futures for April delivery settled at a record US$104.52 per barrel, up US$5, or 5 per cent, on the New York Mercantile Exchange.

On the Nasdaq, shares of software maker Microsoft Corp led the session's advancers to finish up 1.9 per cent at US$28.1199.

Jefferies & Co, a brokerage, started coverage of Microsoft with a 'buy' rating, saying the company's bid to take over Internet media company Yahoo Inc was likely to go through. Yahoo shares climbed 2.2 per cent to US$28.67.

But trading was volatile and at one point, the market briefly succumbed to pressure from a sell-off in financial stocks that came from disappointment in a plan to shore up the No. 2 bond insurer's balance sheet.

Ambac Financial Group Inc , facing billions of dollars of expected losses from guaranteeing repackaged subprime mortgages, said it will sell at least US$1.5 billion of stock and equity-linked securities to help boost capital.

Analysts said the cash won't be enough to stabilise the company's credit-worthiness in the long run.

'If things continue to deteriorate, the circumstances could be different in three to six months and they may have to raise more money,' said Mr Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

Ambac shares sank 18.8 per cent to US$8.70 on the NYSE.

Among banks, shares of Bank of America Corp , the No 2 US bank by assets, declined 1.6 per cent to US$37.55. -- REUTERS

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