An late-day rally carried Wall Street to a positive close, overcoming a $5 spike in crude oil prices and more worries about financials. 

Today's Market

The Dow Jones Industrial Average rose 81.58 points, or 0.73% to 11229.02, the Standard & Poor’s 500 index gained 8.70 points, or 0.70%, to 1253.39 and the Nasdaq Composite Index picked up 22.96 points, or 1.03%, to 2257.85. The consumer-friendly FOX 50 rose 7.02 points, or 0.80% to 888.70.

The soaring oil prices and worries about Lehman Brothers (LEH), Fannie Mae (FNM) and Freddie Mac (FRE) threatened to overshadow what had been a solid rally, fueled in part by Dow Chemical's (DOW) $15.3 billion acquisition of Rohm & Haas (ROH).

The rollercoaster trading session comes a day after the Dow plunged 236 points in a broad selloff that pushed all three major indexes into bear market status for the first time. The S&P 500 had been the lone index to stay out of a bear market, which indicates a 20% decline from 52-week highs. 

Aluminum titan Alcoa (AA) helped prop up the Dow on Thursday, soaring 10%. The big jump came as aluminum prices soared to a record in London after China reduced aluminum output, Bloomberg News reported. On the downside, General Motors (GM) fell sharply on bankruptcy rumors which CEO Rick Wagoner called "inaccurate." Insurer AIG (AIG) was the biggest drag among the blue chips.

The Nasdaq Composite outpaced the broader indexes on Thursday. Activision Blizzard (ATVI) and Sirius Satellite Radio (SIRI) led the Nasdaq 100. 

Even with the positive end to Thursday's trading, the sentiment on Wall Street remains gloomy at best.

“There is a broad base of negative news and fear out there," said Frank Davis, director of sales and trading at Lek Securities. "This slow bleed is painful."  

Crude oil prices made their impact felt once again, soaring above $142 a barrel in the final minutes of trading on Thursday. Oil closed at a one-week settlement high of $141.65 a barrel, up $5.60 on the day. It was the largest one-day dollar gain in Nymex history.

The surge in prices comes after oil shed $9 during the week's previous three trading days. Traders attributed the spike to an AFP report of a high-profile rebel group in Nigeria suspending a two-week-old ceasefire. Also, the energy market worried about the escalation of hostilities between Iran and the West. 

The market reacted positively to a pair of speeches by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson, who urged lawmakers to give the central bank more emergency powers to limit the fallout of a major investment bank failure. 

Wall Street cheered the big M&A news from Dow Chemical, which agreed to buy Rohm & Haas (ROH) for $78 a share. The cash deal represents a 74% premium to the company's Wednesday close at $44.83.  The transaction, which is one of the largest thus far in 2008, was partially financed by Warren Buffett's Berkshire Hathaway (BRK). Dow's stock tumbled 4.5% to 52-week lows on the deal news. 

Retail same-store sales figures mostly topped expectations in June, aided by incentives as well as the government stimulus checks. However, Wall Street was thoroughly unimpressed as traders unloaded shares of retailers. 

Despite topping expectations, retail king Wal-Mart (WMT), Costco (COST) and Gap (GPS) all traded lower on Thursday. All told, two-thirds of the results on Thursday topped analyst estimates and the average gain was 4% -- the largest monthly increase since March 2007, according to tracking firm Retail Metrics. 

Wall Street continues to worry about the government-sponsored mortgage companies Fannie Mae and Freddie Mac. The two companies, which reportedly own or guarantee $5 trillion of U.S. mortgages, have seen their stock prices plunge as shareholders worry about the need to raise capital or an even more dire situation. Bernanke told lawmakers Thursday that Freddie and Fannie are well capitalized right now. He and Paulson also said that both entities play a critical role to the U.S. economy. Still, the enterprises' stocks plunged by double-digit percentages. 

U.S. government officials have held talks to come up with contingency plans if the two mortgage giants fail, The Wall Street Journal reported Thursday.  While the government works on contingency plans on a regular basis, the Journal said the talks have become more serious due to recent concerns in the market that Fannie and Freddie could become insolvent. 

Corporate Movers

General Motors (GM) closed sharply lower even after CEO Rick Wagoner tried to assure the market by saying speculation about bankruptcy is “inaccurate” and not “helpful” for sales. He also said he has no plans to eliminate any brands other than Hummer, a statement that contradicts recent media reports. Wagoner also said GM could cut truck production further if the market shift toward cars continues.

General Electric (GE) said it is leaning toward spinning off its entire consumer and industrial businesses, which include appliances, lighting and industrial units. GE CEO Jeffrey Immelt said a spin-off "makes sense," citing the integrated processes, distribution and backroom operations. GE had previously announced its intent to sell the appliance unit, saying a spin-off was one possible outcome of a strategic review. 

Wachovia (WB) fell sharply a day after it named Treasury undersecretary Robert Steel as its new CEO. The bank also said it plans to set aside $4.2 billion to cover bad loans and sees a second-quarter loss of $2.6 billion to $2.8 billion, much worse than analysts had been expecting. Also, Chairman Landy Smith said in a conference call that rumors of a buyout from Goldman Sachs (GS) are "just silly," saying he doesn't see having a deeper relationship with the investment giant. 

Lehman Brothers (LEH) tumbled another 12% on more market rumors and credit fears. However, the investment bank erased some of its earlier losses after Bill Gross of bond fund at Pimco and hedge fund SAC Capital Advisors denied rumors that they stopped doing business with Lehman. 

IntercontinentalExchange (ICE) declined 10% as lawmakers discuss the possibility of limiting speculation in the energy markets. The uncertainty has had a negative impact on the share prices of Nymex (NMX) and Chicago Mercantile Exchange (CME) as well.

Wal-Mart (WMT), the world's largest retailer, posted a 5.8% jump in June same-store sales from a year ago -- far exceeding Wall Street's expectations. Wal-Mart stores posted a 6.1% increase, while Sam's Club had 4.6% growth. The company cited improved weather and the stimulus checks. Wal-Mart also boosted its second-quarter forecast on the results.

Nordstrom (JWN) fell sharply to three-year lows after the retailer said its same-store sales plunged 18.6% last month. While the sales decrease was as expected, the company sees second-quarter earnings on the low end or slightly below its forecast of 65 cents to 70 cents. Mean estimates from Thomson Reuters call for earnings of 67 cents.

Ruby Tuesday (RT) soared more than 20% a day after the restaurant chain operator posted fiscal fourth-quarter results that beat the Street. The company earned 27 cents a share, seven cents above mean estimates from Thomson Reuters. Ruby Tuesday sees fiscal 2009 earnings of between 50 cents and 70 cents a share, compared to average estimates for 51 cents. Also, the company said it plans to close 15 restaurants as their leases run out.

Data Dump

The Labor Department gave a mixed report. The government said weekly jobless claims declined by the most since September 2005 but continuing claims, those for individuals needing benefits for more than four weeks, soared by 91,000 to the highest level since December 2003. 

Initial claims declined by 58,000 to 346,000 last week, compared to a much more modest 9,000 claim decline that economists had forecasted. 

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, fell 59.47 points, or 1.78%, to 3283.01. The FTSE 100, London's benchmark index, lost 122.80 points, or 2.22%, to 5406.80

On the continent, Paris's CAC 40 Index dropped 108.10 points, or 2.49%, to 4231.56 while Germany's DAX declined 81.46 points, or 1.28%, to 6305.00.

In Asia, Japan's benchmark Nikkei 225 Index added 15.08 points, or 0.12%, to 13067.21. Hong Kong's Hang Seng gained 15.97 points, or 0.07%, to 21821.78.