Stocks Rally After Another Strong Auction

Cindy Perman|

Stocks rallied Thursday as an unexpected profit from Bed, Bath & Beyond buoyed consumer stocks — and hopes for an economic recovery.

Stocks had opened lower after weekly jobless claims came in higher than expected but quickly rebounded.

Plus, another strong Treasury auction boosted confidence: The U.S. sold $27 billion of seven-year notes with a yield of 3.329 percent. This was the latest sign that the government isn't having any trouble selling its debt, following strong demand for auctions of 2-year and 5-year notes in the past two days.

And Federal Reserve Chairman Ben Bernanke testified on Capitol Hill today, saying he didn't bully Bank of Americainto buying Merrill.

"I did not tell Bank of America's management that the Federal Reserve would take action against the board or management" if they decided to invoke a clause in the acquisition contract in an attempt to stop the deal, Bernanke told the House Oversight and Government Reform Committee. "Moreover, I did not instruct anyone to indicate to Bank of America that the Federal Reserve would take any particular action under those circumstances."

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.

Bank of America also announced that it has raised over $12 billion in fresh capital.

Overall, bank stocks were mostly lower.

But retail stocks registered solid gains after Bed, Bath & Beyond reported a surprise profit as its results were helped by cost-cutting measures.

JCPenney jumped more than 5 percent and Home Depot gained more than 2 percent.

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 couldto meet surging demand. Shares rose.