Stocks Gain as Investors Digest Auction Results

After a quick dip on a knee-jerk to the latest Treasury auction, stocks resumed their ascent.

The government sold $11 billion of 30-year bonds at a yield of 4.72 percent, lower than where the 30-year was before the auction.

At first glance, the auction results sent investors out of stocks and into the relative safety of bonds but after further consideration, investors jumped right back into buying stocks.

"Rates are back up so much that at some point you've got to reach parity between supply and demand; maybe we've reached that point after the move we've had in the last month or so," John Schloegel, vice president of investment strategies at Capital Cities Asset Management, told Reuters.

Investors have become increasingly concerned about bond yields, as evidenced by a negative reaction to yesterday's 10-year note auction, which saw a higher than expected yield of 3.99 percent, which briefly sent the 10-year yield above 4 percent. The yield on the 10 year was back below 3.9 percent Thursday.

Stocks got an early boost from the pre-market economic reports, which showed jobless claims fell last week and retail sales ticked higher in May.

Initial claims for unemployment benefits fell by 24,000 last week to 601,000, a much sharper drop than expected. This comes after the May jobs report showed an unexpectedly small number of job losses.

Meanwhile, retail sales rose 0.5 percent in May, the first gain in three months, boosted by rising gasoline prices. April sales were revised to show a 0.2-percent drop, half the 0.4-percent decline initially reported.

And business inventories shrunk by 1.1 percent in April, the eighth straight month that businesses have pared back their inventories.

Bank of America rose after KBW raised its rating on the stock to "outperform" from "market perform," citing valuation and its balance sheet.

Bank of America CEO Ken Lewis will be testifying before a House panel this morning amid controversy over how much pressure government officials did or didn't put on Lewis to complete the acquisition of Merrill Lynch late last year.

UBS shares also climbed after the bank said it doesn't see any additional layoffs.

Goldman Sachs said it remains cautious on regional banks as the pre-tax return for these banks is about 1.5 percent, less than the 2 percent at the bigger banks. Still, Goldman raised its rating on several regional banks, bumping Regions Financial and Fifth Third up to "buy" and BB&T and Huntington to "neutral."

GlaxoSmithKline has begun cutting some of its drug prices in Asia in an effort to boost global sales by making its products more affordable.

Shares of Palm jumped after the smartphone maker tapped former Apple executive Jon Rubenstein as its next chief executive officer, succeeding Ed Cooligan.

Elsewhere in tech land, National Semiconductor fell ahead of earnings from the chip maker, due out after the closing bell.

Japanese stocks were marginally lower overnight, though the Nikkei 225 did briefly break above the 10,000 mark for the first time since October. Ahead of the economic data, U.S. stock futures are pointing to a modestly higher open, while European stocks are trending higher at this hour.

Still to Come:

THROUGH FRI: Apple developers' conference
THURSDAY: Earnings from Nat Semi after the closing bell
FRIDAY: Import/export prices; consumer sentiment

- Peter Schacknow, Senior Producer, CNBC, contributed to this report.

© 2009 CNBC.com