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The major indexes were diving Thursday afternoon; the Dow sank to its lowest levels in three months. But in the last hour of trading, Reuters reported that the Obama administration was working on a plan to subsidize mortgage payments to keep struggling homeowners out of foreclosure.

The market turned on a dime as jumpy investors seized on the report as an excuse to push shares sharply higher.

The Dow Jones industrial average regained nearly 240 points in the final hour to close down just 6.77 points, or 0.1 percent, at 7,932.76.

The broader Standard & Poors 500-stock index, which had come in sight of its late-November lows, raced back and closed higher by 1.45 points, or nearly 0.2 percent, at 835.19. The technology-heavy Nasdaq finished up 11.21 points, or 0.7 percent, to 1,541.71.

Indecision is breeding nervousness, nervousness is breeding volatility, and thats what were seeing, said Anthony Conroy, head equity trader at BNY ConvergEx Group.

Analysts said they were happy to see that the major indexes had not fallen below the lows they hit on Nov. 20, but they conceded that the fundamentals of the financial market and the economy were still the same at days end. Investors are still pessimistic about the scope of the recession, and they still worry that the governments $790 billion stimulus and its plans to shore up the banking system may not work.

This is something were going to have to work through, and thats what people are nervous about theres not that quick-fix answer, Mr. Conroy said.

Financial stocks were still a drag on the market on Thursday. Shares of Citigroup, Bank of America, Wells Fargo and PNC Financial Services were lower.

The downward turn on Thursday added to steep losses over the previous two days, when investors reacted negatively to the federal governments latest moves to shore up the banking system and address the hard-to-sell assets weighing down banks.

On Tuesday, Treasury Secretary Timothy F. Geithner outlined sweeping measures whose price tag could total $2.5 trillion, but investors said the plans were short on details.

The world had been looking to Geithner and the U.S. Senate for a cure-all, said Michael Holland, chairman of Holland & Company, an investment firm. They vote instantaneously, and they voted a global thumbs-down. And its feeding on itself.

At a hearing in Washington on Wednesday, Mr. Geithner said the Obama administration would move quickly to develop the latest bank bailout plans, but he defended the lack of specificity, saying he did not want to introduce a fully designed program prematurely.

With most of the fourth-quarter corporate earnings reports already out, analysts said that Wall Street increasingly would look to Washington for cues on how to move. Despite some improvement in bank-to-bank borrowing rates and in the market for high-quality corporate debt, credit markets remain tight and banks are still skittish about lending.

Nothing can really improve until credit begins to flow, said David Darst, chief investment strategist of Morgan Stanleys global wealth management group.

Markets were lower at the close of trading in Europe.

Today we have seen quite broad-based selling, said Espen Furnes, a fund manager at Storebrand Asset Management in Oslo. There is a more cautious stance after what has happened this week and some disappointing earnings.

Still, Mr. Furnes also sounded a note of cautious optimism.

There are people out there with cash who want to buy in, but they need more encouragement and more stability, he said, adding that the market is not experiencing the volume of selling that was seen last fall.

The Treasurys 10-year note rose 2/32, to 99 23/32. The yield, which moves in the opposite direction from the price, fell to 2.79 percent, from 2.82 percent late Wednesday.

Following are the results of Thursdays Treasury auction of 30-year bonds:

Matthew Saltmarsh contributed reporting.