Stocks flat as stimulus hopes offset Wal-Mart

NEW YORK (Reuters) - Stocks were little changed on Thursday as investors took bleak signs of more deterioration in consumer spending as likely to spur Washington to approve a stimulus plan quickly to jolt the economy out of recession.

Wal-Mart Stores Inc cast gloom over the market, with disappointing December sales and a dim profit outlook.

Expectations that U.S. President-elect Barack Obama, who is due to be sworn in on January 20, will push for a massive economic stimulus plan helped the market cut losses, however.

Obama, speaking on the economy, said his plan includes a $1,000 tax cut for middle-class families and extended jobless aid and healthcare coverage for the unemployed.

Investors snapped up some of Wednesday's worst losers, including aluminum producer Alcoa , up 2.6 percent at $11.17 on the New York Stock Exchange, and Microsoft Corp , up 2.4 percent at $19.97 on Nasdaq.

Wal-Mart offered the starkest indication yet that consumer spending, which accounts for about two-thirds of U.S. economic activity, continues to falter as households fret about mounting unemployment and dwindling savings.

"The very poor retail numbers were certainly expected and the market is looking forward to the stimulus plan," said Robert Francello, head of equity trading for Apex capital hedge fund in San Francisco. "Jobless claims were also better than expected."

The Dow Jones industrial average fell 42.05 points, or 0.48 percent, at 8,727.65. The Standard & Poor's 500 Index shed 1.68 points, or 0.19 percent, to 904.97. The Nasdaq Composite Index gained 2.85 points, or 0.18 percent, to 1,601.91.

(Additional reporting by Deepa Seetharaman; Editing by James Dalgleish)