Lifted by a late-day surge, the Dow just about broke even Thursday, erasing a 200-point selloff as Wall Street rallied around a report of a new federal plan for rescuing troubled mortgages. 

Today’s Markets

The Dow Jones Industrial Average lost 6.77 points, or 0.09%, to 7932.76, the S&P 500 rose 1.45 points, or 0.17%, to 835.19 and the Nasdaq Composite jumped 11.21 points, or 0.73%, to 1541.71. The consumer-friendly FOX 50 gained 1.52 points, or 0.25%, to 620.22.

The markets had been deeply in the red throughout the day as a better-than-expected retail sales report had been overshadowed by an all-time high for continuing jobless claims and continued uncertainty about the financial rescue plan and $789.5 billion stimulus package. Wall Street was also focused on $33 oil prices and an earnings beat from Coca-Cola (KO).

“The market was definitely spooked and was looking for a reason to rally. The market is starving for direction and description as to what will happen with this” bailout money, said Frank Davis, director of sales and trading at LEK Securities. 

Wall Street received a late-day gift as Reuters reported the Obama Administration is working on a program to subsidize mortgage payments for troubled homeowners even before they become delinquent. The program would represent a major break from existing ones and would require a uniform eligibility test, the wire service reported. 

“Justified or not, the perception is [the potential mortgage rescue] will be a net positive for the banks. It kind of fed on itself,” said Michael James, senior equity trader at Wedbush Morgan Securities. “But we’re trading in relatively thin markets so that type of news, given where the market was when it came out, was certainly fuel for the rally we’ve seen. Whether it has any staying power, who knows.”

By the time the dust settled, nearly half of the Dow's 30 components were higher on the day, led by Coca-Cola, Pfizer (PFE) and Walt Disney (DIS). The index's biggest losers on the day were Bank of America (BAC) and General Motors (GM). 

Even with Thursday's comeback, the Dow has still been unable to post a significant rebound from Tuesday's 382-point plunge, which was fueled by a lack of specifics emerging from Treasury Secretary Timothy Geithner's financial rescue plan. The index is now less than 400 points away from its 5 1/2-year low, set on Nov. 20. 

The Nasdaq Composite enjoyed a stronger rally than the broader markets as tech stocks like Apple (AAPL) and BlackBerry maker Research in Motion (RIMM) rose sharply. 

Data, Stimulus in Focus

The markets received a rare positive economic report on Thursday as the Commerce Department said retail sales unexpectedly jumped 1% in January following December’s deep slide. 

That positive retail report was overshadowed by another bleak labor report as the Labor Department said jobless claims filed by those out of work for more than a week rose by 11,000 to 4.81 million -- the highest level since records began in 1967. The government also said initial jobless claims declined by 8,000 to 623,000 last week.

“Those 4.8 million people are not spending money, not going out to eat, not traveling to other states on vacation and not buying gifts for friend’s birthdays. Getting those people back to work and getting disposable income in their pockets is incredibly important,” Dan Greenhaus, Miller Tabak equity analyst, wrote in a research note..

Meanwhile, the markets are still digesting the $789.5 billion stimulus package that emerged from the House and Senate on Wednesday. Lawmakers said the bill, which is down roughly $50 billion from previous versions, will create 3.5 million jobs, down from previous estimates of 4 million. 

The legislation, which represents one of the largest economic recovery packages since the New Deal, could be approved by the end of the week. The stimulus package is comprised of $282 billion of tax cuts for businesses and individuals and more than $500 billion of spending on infrastructure, unemployment benefits and other programs, The Wall Street Journal reported. The compromise bill reportedly cut back on tax breaks for home and auto buyers.

On the commodity front, crude oil futures plunged to their lowest level since Dec. 19, extending their losing streak to five days.  A day after the government released another bearish inventory report, the price of a barrel of crude settled at $33.98, down $1.96, or 5.45%, on the day. Despite briefly inching into positive territory, the commodity has now lost 17.5% of its value over the past five days. 

Meanwhile, gold futures rose for the third straight day, settling up $4.70 per ounce to $948.50, the highest level since July 21. 

Corporate Movers

Coca-Cola (KO) beat the Street with a fourth-quarter adjusted-profit of 64 cents per share thanks to sharp increases in overseas volume . However, the world's largest soft-drink maker said sales fell by a steeper-than-expected 2.7% to $7.13 billion during the quarter. 

Sirius XM Radio (SIRI) may have found a “white knight” in its quest to avoid bankruptcy and a takeover from satellite mogul Charles Ergen as Sirius is in talks with Liberty Media (LMDIA), which owns DirectTV (DTV), the Journal reported. The talks are advanced but it’s unclear how much Liberty would invest and whether it would end up with control of Sirius, the newspaper reported.

Dow Chemical (DOW) slashed its dividend by 64% to 15 cents per share, citing the recession and business uncertainties.

Viacom (VIA) missed estimates with adjusted-earnings of 76 cents per share on in-line revenue of $4.24 billion. The owner of MTV and Comedy Central took a $454 million charge.

Rio Tinto (RTP) landed a $19.5 billion investment from Chinese state-owned Chinalco, which could double its stake in the world’s largest aluminum maker to 18%. Chinalco will buy $7 billion of convertible bonds in Rio and take stakes in $12.3 billion of the miner’s assets.

General Motors (GM) is in talks with China’s SAIC Motor Corp. about selling stakes in a joint venture and other assets in an effort to raise cash, Reuters reported. GM is trying to make progress in cutting costs and securing concessions ahead of a Tuesday deadline with the government.

Las Vegas Sands (LVS) fell sharply a day after the casino operator posted a weaker-than-expected adjusted-loss of 4 cents per share. The owner of the Venetian and a pair of casinos in Macau said it is still trying to trim its debt and cut costs, possibly by selling noncore assets. 

Harley-Davidson (HOG) saw its shares sink after the motorcycle maker slashed its dividend by 70% in an effort to save $200 million a year. 

Data Dump

In another indication of the weak economy, the government said business inventories plunged by a steeper-than-expected 1.3% in December as businesses continued to brace for deteriorating demand. The drop in inventories represents the largest since October 2001.

Global Markets

World markets tumbled on Thursday even as the U.S. neared a gigantic stimulus package. 

In Europe, the Dow Jones Euro Stoxx 50 fell for the third straight day, sinking 2.33% to 2214.95 while London's FTSE 100 sank 0.76% to 4202.24 and Germany's DAX lost 2.7% to 4407.56.

In Asia, Tokyo's Nikkei 225 plunged 3.03% to 7705.36 while Hong Kong's Hang Seng dropped 2.3% to 13228.30. Australia's ASX 200, which is dominated by mining and materials stocks, rose 1.15% to 3514.30.