Stocks Rise as Investors Look to Bernanke

NEW YORK (TheStreet) -- U.S. stocks were extending the previous day's rally Thursday as investors held out hopes thatFederal Reserve Chairman Ben Bernanke would reveal potential easing measures by the central bank at his congressional testimony later this morning.

China's surprise cut to its benchmark interest rates was also supporting the rally.

The Dow Jones Industrial Average was ahead by 55.2 points, or 0.4%, at 12,470. The S&P 500 was up 12.7 points, or 1%, at 1328, and the Nasdaq was up 25.8 points, or 0.9%, at 2871.

The major U.S. equity indices finished Wednesday's powerful 2%-plus rally on a high note as investors flooded into stocks on the hope that the Fed could soon signal its openness to another round of quantitative easing.

Bernanke testifies before the Joint Economic Committee in Congress at 10 a.m. EDT. Investors will parse the nuances of his congressional testimony for guidance ahead of the FOMC meeting in two weeks.

Policymakers in recent days remained divided over the need for more stimulus and investors want to know if they'll ultimately agree to act on tepid domestic jobs growth, deepening European contagion risks and the looming U.S. fiscal cliff with an Operation Twist II or QE III this month.

Federal Reserve Vice Chair Janet Yellen said Wednesday night that "risk management considerations arising from today's unusual circumstances strengthen the case for additional accommodation," suggesting that the Fed could ramp up its bond purchasing program or hold off on interest rate hikes.

"Yellen has taken the spotlight away from Bernanke today," said Eric Green, head of interest rate strategy at TD Securities. "I may not want to draw key conclusions from Yellen, but I will because her speech is more central to Bernanke's thinking than he will let on today."

The Labor Department reported Thursday that weekly initial jobless claims for the week ended June 2 fell to 377,000 from the previous week's upwardly revised figure of 389,000. The decline was the first since April. Economists surveyed byBriefing.com expected the number of Americans filing unemployment claims for the first time to slide to 375,000.

The four-week moving average was 377,750, an increase of 1,750 from the previous week's average of 376,000.

Continuing claims for the week ended May 26 was 3.293 million, an increase of 34,000 from the preceding week's level of 3.259 million.

"The underlying trend in claims is still upwards, but we expect it to turn back down again very soon," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "We note that over the past four weeks the weekly change in unadjusted claims has been on average about 2,000 less than in the same weeks in 2007, when the calendar was the same as this year. If this persists over the next four weeks, the headline claims number will drop to 357,000. The economic story, we think, is that the gas price hit is reversing."

At 3 p.m., the Federal Reserve is expected to report that consumer debt rose by $10 billion after soaring by $21.4 billion in March.

The FTSE in London was up 0.7% and the DAX in Germany was rising 0.6% as the eurozone's strongest economy indicated some willingness to take on more balance sheet risk for some the peripheral countries.

The Hang Seng Index in Hong Kong settled up 0.9% and the Nikkei in Japan rose 1.2%.

The People's Bank of China slashed its benchmark lending and deposit rates by 0.25 percentage points to prevent excessive cooling of economic growth in the country. The PBOC also said that it will give the green light for the deposit rate to soar by 110% of the benchmark rate and the lending rate decline to 80% of the benchmark.

The July crude oil contract was up $1.37 at $86.39 a barrel. August gold futures were falling $18.50 to $1,615.70 an ounce.

The benchmark 10-year Treasury was up 2/32, lowering the yield to 1.658%. The dollar was off 0.3%, according to the dollar index.

In corporate news, Apple(AAPL) has moved to stop Samsung's sale of the Galaxy S III smartphone in the U.S.

Nasdaq OMX Group(NDAQ) announced Wednesday a $40 million compensation plan for financial organizations that lost out in the botched Facebook(FB) IPO last month.

J.M. Smucker (SJM), the maker of jellies and jams, reported fourth-quarter net income Thursday of $104.1 million, or 93 cents a share, up from year-earlier earnings of $94.9 million, or 82 cents a share. Adjusted profit rose to $1.10 a share from $1 a share. Net sales for the fourth quarter were $1.36 billion.

On average, analysts expected earnings of $1 a share on sales of $1.36 billion.

For fiscal year 2013, the company anticipates that net sales will increase 7% and non-GAAP earnings will be between $5 and $5.10 a share. The earnings projection excludes a cost of 50 cents a share for special projects.

lululemon athletica(LULU) reported Thursday first-quarter earnings of $46.6 million, or 32 cents a share, up from year-earlier earnings of $33.4 million, or 23 cents a share. The athletic wear retailer posted first-quarter revenue of $285.7 million.

Analysts, on average, anticipated first-quarter earnings of 30 cents a share on revenue of $270.9 million.

Andrea Tse

06/07/12 - 09:47 AM EDT