Stocks Rally, Led by Banks, After Bernanke

Stocks rallied Thursday, led by banks, after testimony by Fed Chairman Ben Bernanke on Capitol Hill and some encouraging earnings reports.

The Dow was up more than 100 points, or nearly 1 percent, approaching the halfway point.

The U.S. economy still needs help from the Fed's low-interest-rate policy but the central bank is prepared to begin removing its extraordinary stimulus measuresas economic expansion "matures," Bernanke told the House financial-services committee in a hearing about the Fed's exit strategy. (Click here to watch a live-streaming video of the hearing.)

Financials were the best performers this morning, with Bank of America leading the Dow and Citigroup up more than 5 percent.

"Banks are leading the way because they like what Bernanke is saying," said Dave Rovelli, managing director of equity trading at Canaccord Adams. "He's saying everything friendly to the marketplace, not spooking anybody," he said.

Plus, banks are projecting better earnings, with more assets — and better valued assets — on their books now, Rovelli said.

And, of course, as the quarter winds down, traders and fund managers are pouring money into rallies so they don't end the quarter underperforming the market.

Solid company performance helped set the tone early on, with Best Buy shares surging after the company smashed fourth-quarter earnings expectations.

This came after Adobe and General Mills delivered results earlier this week that also beat expectations.

Qualcomm shares jumped more than 8 percent after the company, which makes chips for cellphones and other gadgets, raised its sales and earnings forecast for the second quarter, citing strength from licensing revenue among the reasons.

Campbell Soup CEO Douglas Conant offered some upbeat comments on the soup market. Conant told the Wall Street Journal soup sales are picking up thanks to the company's promotional efforts.

US-traded shares of Lululemon shot up more than 10 percent after the Canadian athletic-clothing retailer delivered strong results, with revenue up 55 percent, helped by its growing line of running gear.

Oracle shares rose ahead of the software giant's earnings, due out after the closing bell.

ConAgra, however, fell after matching estimates.

(Check CNBC's Earnings Central for all the latest earnings news.)

Earnings season gets into full swing in a couple of weeks. Art Hogan, the chief market analyst at Jefferies, notes that right now is typically when companies issue profit warnings and the fact that there haven't been many warnings is a good sign for earnings — and the market.

"I really feel like this market is on a path higher in the near term," Hogan said. "The first quarter is about to wrap up and there are virtually no preannouncements from Corporate America — that means earnings are are going to be much better," Hogan said.

"I think there's another 10 percent to the upside by year end," Hogan said.

As the health-care bill heads back to the Housefor a few, ahem, corrections, companies are starting to talk about how much the new legislation is going to cost them.

Farm equipment maker Deere said it expects its after-tax expenses to jump by $150 millionthis year due to a one-time charge related to its retiree benefits. This followed a similar warning by Caterpillar and AKSteel . Essentially, the health-care legislation will now tax a federal subsidy on retiree health benefits. Industrial companies may be the hardest hit as they tend to have the most retirees.

In the morning's economic news, initial jobless claims dropped by 14,000 last week, more than expected. And mortgage rates ticked higher, with the average on the 30-year fixed up to 4.99 last week, from 4.96 in the previous week.

Treasury prices continued to slide after another weak auction: The seven-year saw a high yield of 3.374 percent and a bid-to-cover ratio of 2.61.

Rovelli said he thinks tech is going to lead the way in this first-half rally, but that the market will peak sometime in the second quarter or early third as the realization sets in that taxes on the wealthy are going up — and they're going to keep going up — given all the U.S. debt piling up, plus a lot of adjustable-rate mortgages piling up.

Investors will also be keeping an eye on developments overseas as European Union leaders are divided on Greek aid ahead of a summit to be held in Brussels.

Still to Come:

THURSDAY: Toyota class-action hearing; seven-year auction; Earnings from Oracle after the bell
FRIDAY: Final read on Q4 GDP; consumer sentiment; Fed's Warsh, Bullard speak

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