By midafternoon, the S&P 500 was flat and the Dow Jones Industrial Average fell 0.18%. The Nasdaq held onto its gains, up 0.43%.
U.S. crude inventories increased 7.7 million barrels over the week ended Feb. 3, above 4.9 million barrels a week earlier, according to the Energy Information Administration. The reading was far less than an estimate from the American Petroleum Institute on Wednesday that weekly inventories had increased 14.3 million barrels.
"Someone has got to flinch, whether it be a country or a company," said Cornerstone Financial Partners' Jeff Carbone. "We don't think it's going to continue to stay down because we do think someone is going to pull back production at some point, but we still don't think we've seen the bottom as of yet."
West Texas Intermediate crude recovered from a 5% drop earlier Thursday, but remained 2.1% lower at $51.05 a barrel. Oil prices are at half their mid-summer high as a drop in U.S. rig counts and a number of oilers cutting future investments isn't seen as enough to remedy global oversupply and tepid demand.
Oil companies including Chevron (CVX) , Royal Dutch Shell (RDS.A) and BP (BP) all were trading lower. Exxon Mobil (XOM) was already down 1.3% after California ordered the shutdown of its Torrance refinery following a major fire on Wednesday. The refinery could be closed for as much as six months while an investigation is ongoing.
Wal-Mart (WMT) beat earnings estimates in its fourth quarter, reporting $1.61 a share, 8 cents higher than expected. Same-store sales increased 1.2%, but total revenue of $131.56 billion missed forecasts by $800 million. The world's largest retailer also said it would boost hourly wages to at least $9 for half a million workers, $1.75 above federal minimum wage. Shares were down 3%.
Airlines were participating in a fresh rally after crude oil prices continued their slide. Delta Air Lines (DAL) jumped nearly 3%, American Airlines (AAL) and Southwest (LUV) added more than 1%, and United Continental (UAL) climbed 0.88%.
Priceline (PCLN) and Discovery (DISCA) were pulling the Nasdaq higher. Priceline jumped 8.3% after recording a 22% increase in net income over the quarter. The online travel company said total gross bookings increased 17% to $10.7 billion.
Discovery Communications added 1.5% after profit surged in its fourth quarter, beating estimates, on strength in U.S. advertising. Though international networks revenue jumped 17%, top-line growth was hurt somewhat by foreign exchange headwinds.
T-Mobile (TMUS) was up 3% after reporting a surge in fourth-quarter revenue. The telecom earned 12 cents a share over the quarter, 7 cents better than expected.
U.S. jobless claims fell 21,000 to 283,000 for the week ended Feb. 13. Economists had expected 290,000 new claims for unemployment benefits over the week.
The Philadelphia Fed Survey reported general business conditions falling to 5.2 in February from 6.3 a month earlier. Economists had expected a reading of 8.2. The survey is used as a case study for manufacturing conditions to forecast growth across the Fed districts.
"Whether this is in part a reflection of a stronger dollar over the past several months remains to be seen, but it does go hand-in-hand with a dip in new orders," said Andrew Wilkinson, chief market analyst for Interactive Brokers. "For now, the indicator can possibly be overlooked, but it is a modest red flag to keep an eye on going forward."
-- Written by Keris Alison Lahiff in New York.