NEW YORK (AP) - A deal to help head off more mortgage foreclosures pulled Wall Street out of a slump yesterday, giving stocks a mostly higher close. Democratic lawmakers reached an agreement with Citigroup Inc. on a plan to let bankruptcy judges alter loans in an effort to prevent home from going into foreclosure. Other lenders are expected to follow suit.

Wall Street traded lower for much of the session after a profit warning from Wal-Mart Stores Inc. intensified fears that consumers are even worse off than thought. Their reluctance to spend - evident in yesterday's retail sales reports from many of the nation's biggest merchants - could make it harder for the nation to recover from the recession.

The Dow Jones industrial average ended with a modest decline while the technology-focused Nasdaq composite index rose more than one percent. Tech stocks showed some of the biggest advances on the belief that the industry will lead the market's recovery. The number of advancing stocks outpaced decliners by about two-to-one on the New York Stock Exchange.

"Instead of people selling into the rallies they're starting to buy into the dips," said Bill Groenveld, head trader for vFinance Investments, referring to the market's shift away from the panic that dominated trading in the fall.

The agreement between Citigroup and Senators Richard Durbin, Charles Schumer and Christopher Dodd raised hopes that the steep downturn in the housing market that has badly hurt consumer spending and the overall economy could be halted. The lending industry had fought the concept, saying it would force lenders to raise mortgage rates. Housing stocks rose on the news.

"Any sort of arrangement that can stave off foreclosure and modify existing mortgages, all of those things will help to get to the bottom of the housing market decline. And only then can we see a real turnaround in the economy," said Randy Frederick, director of trading and derivatives at Charles Schwab.

Investors remained cautious for much of the session after Wal-Mart said December sales at stores open for at least a year rose by 1.2 percent, including fuel, a worse performance than analysts expected. The nation's largest retailer also slashed its projection for fiscal fourth-quarter earnings, and its shares fell more than seven percent.

"It's not surprising to me that the market came back a little bit," Mr. Frederick said. Investors largely expected, with the exception of Wal-Mart, for the retail sales figures to be bad, and so for the most part were able to push them aside.

According to preliminary calculations, the Dow fell 27.24, or 0.31 percent, to 8,742.46.

Broader stock indicators advanced. The Standard & Poor's 500 index rose 3.08, or 0.34 percent, to 909.73, and the Nasdaq composite index rose 17.95, or 1.12 percent, to 1,617.01.

The Russell 2000 index of smaller companies rose 4.91, or 0.99 percent, to 502.01.

Advancing issues outpaced decliners by about two-to-one on the New York Stock Exchange, where volume came to a light 1.2 billion shares.

On Wednesday, the Dow fell 245 on worries about rising unemployment and a warning from technology giant Intel Corp. about poor business conditions. Bleak comments from aluminum producer Alcoa Inc. and media company Time Warner Inc. added to investors' concerns.

The market's fears about the economy have been focused largely on the deteriorating job market. The Labour Department said the number of new claims for jobless benefits unexpectedly dipped last week, but the number of people continuing to file claims rose to a new 26-year high. And economists believe the government will report today another massive jobs loss for December.

"The market has been bracing itself for a pretty grim number," said Craig Peckham, market strategist at Jefferies & Co.

As the economy worsens, most on Wall Street are hoping that a stimulus package proposed by President-elect Barack Obama will win congressional approval. Obama said in a speech yesterday that the recession could linger if Congress does not funnel unprecedented dollars into the economy. "In short, a bad situation could become dramatically worse," he said.

The lawmakers announcing the mortgage deal with Citigroup hope to attach it to Obama's stimulus proposals.

Government bond prices rose as unease about the economy stoked demand for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.45 percent from 2.50 percent late on Wednesday.