Stocks rebounded Thursday after a lower open as an unexpected profit from Bed, Bath & Beyond boosted consumer stocks.
Stocks had opened lower after weekly jobless claims came in higher than expected.
Investors turned their attention to a House hearing on Fed Chairman Ben Bernanke's role in the Bank of America-Merrill Lynch merger. Rep. Darrell Issa, a Republican from California, alleged that the Fed "engaged in a cover-up,"deliberately hiding concerns about the merger of the bank with Merrill Lynch from other regulators.
>> Watch a live-streaming video of the hearing
Bank of America stock skidded after Citigroupslashed its price target on the stock to $18 from $20, predicting a loss in the second quarter and a big writedown on Merrill Lynch debt. However, it kept its "buy" rating on the stock.
Bed, Bath & Beyond reported a surprise profit as its results were helped by cost-cutting measures.
Other retail stocks rose, including JCPenney, which jumped more than 5 percent and Home Depot, which gained more than 2 percent.
Initial jobless claims jumped by 15,000 to 627,000 last week, higher than the expected 600,000 and indicative that the unemployment burden continues to pressure the economy.
"While many analysts pointed to the drop in continuing claims reported last week as evidence of a healing labor market, we are not so sanguine," Joshua Shapiro, chief U.S. economist at MFR, wrote in a note to clients. "With initial claims still very high at above 600K, it is unlikely that new hiring has picked up in any meaningful fashion. More probable is that long-term unemployed are starting to fall off the rolls as the duration of their unemployment benefits reaches the statutory limit."
And the economy contracted 5.5 percent, the Commerce Department said in its final reading on first-quarter GDP. That was a smaller contraction than the 5.7 percent initially reported.
After a two-day meeting, the Federal Reserve said Wednesday that the "pace of economic contraction is slowing" but that it "continues to anticipate that economic conditions are likely to warrant exceptionally low levelsof the federal-funds rate for an extended period."
The Fed also said it would "employ all available tools to promote economic recovery and to preserve price stability." Policy makers didn't introduce any new debt buyback plans.
At 1 pm ET today, the results of the Treasury's auction of 7-year notes are due out. Demand for 2-year and 5-year notes was strong the past two days, as the Treasury sets a record by selling $104 billion dollars in debt this week.
And the House Financial Services Committee holds a hearing on affordable housing, and the House Budget Committee holds a 10 am hearing on "pay go."
The Treasury sold $37 billion of five-year notesat a high yield of 2.7 percent — not as aggressive as the prior sesssion's auction of two-year notes but still solid demand and pricing. The government sold $40 billion of two-year notes on Tuesday.
American International Group said it will cut its federal loan burden by $25 billion by giving the government a preferred stake in two units that will be spun off from the insurance giant.
A hearing in the General Motors bankruptcy case Thursday could provide some insight into General Motors' finances and its efforts to exit bankruptcy.
Techs will again be in focus as Yahoo holds its shareholders meeting in Santa Clara, Cal. at 1 pm New York time.
And there are a couple of earnings from the sector: chip maker Micron Technology and smart-phone maker Palm both report after the closing bell.
After the bell Wednesday, sports-apparel retailer Nikeposted a surprise increase in profit after the closing bell, beating expectations. But its shares fell.
Rental-car giant Hertz surprised the market by posting a 2009 profit and its CEO told CNBC that it was buying new cars as fast as it could to meet surging demand. Shares rose.
In housing, home builder Lennar posted a quarterly loss of $125.2 million, or 76 cents a share, a bit larger than expected considering a slight uptick recently in new home sales.
Another big gainer early on was Jefferies Group , after the investment bank posted earnings and outlook that beat expectations. Jefferies shares rose.
Still to Come:
THURSDAY: Earnings from Palm after the bell
FRIDAY: Personal income/spending; consumer sentiment; Earnings from KBHome
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