U.S. STOCKS - Wall St ekes out gain as oil pulls back

By Kristina Cooke

NEW YORK (Reuters) - U.S. stocks rose modestly on Thursday after two days of steep declines as energy prices pulled back from record highs and a proposed acquisition in the utilities sector buoyed optimism.

Power producer Calpine Corp rose more than 8 percent a day after NRG Energy Inc made an unsolicited bid to buy the company for about $11 billion.

An index of utility stocks rose 0.5 percent. Analysts said the recent uptick in M&A activity was supportive of stocks.

Oil prices retreated from yet another record high hit earlier on Thursday, helping an index of airline shares, which are especially sensitive to fuel prices, to rise 0.7 percent after a 10 percent plunge a day earlier.

The bargain hunting also extended to financial stocks after recent declines on the growing belief that the Federal Reserve is done cutting interest rates. The S&P financials sub-index rose 0.9 percent.

"Oil has been doing its gyrations back and forth, but it's good news that it's pulling back a bit now. But yesterday was a very damaging day," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. The Dow Jones industrial average fell more than 220 points on Wednesday.

On Thursday the Dow rose 24.43 points, or 0.19 percent, to close at 12,625.62. The Standard & Poor's 500 Index climbed 3.64 points, or 0.26 percent, to 1,394.35, while the Nasdaq Composite Index was up 16.31 points, or 0.67 percent, at 2,464.58.

In positive news about the economy, the Labor Department reported weekly jobless claims fell by 9,000 to the lowest level in a month.