U.S. stocks gain on retailers shine

By Herbert Lash

NEW YORK (Reuters) - U.S. stocks rose on Thursday after encouraging news from retailer Bed Bath & Beyond Inc and home builder Lennar Corp, while the U.S. dollar slipped on optimism that the economy's woes were ebbing.

Investor sentiment, however, remained at cross-currents as benchmark U.S. Treasury notes rose over a full point after a surprising jump in U.S. jobless claims revived economic worries.

Copper and gold prices rebounded, spurred by the falling dollar, while oil prices rose sharply to above $70 a barrel on renewed rebel attacks in Nigeria and worries that a glitch at the largest U.S. oil refinery may tighten gasoline stockpiles.

The U.S. stock market's rally on improved risk appetite reduced the dollar's safe-haven bid, which had earlier been sparked by the unexpected rise in new claims for unemployment benefits.

Stocks also rose after Federal Reserve Chairman Ben Bernanke withstood tough grilling in Congress on whether he had coerced Chief Executive Kenneth Lewis of Bank of America to go forward with plans to buy a flagging Merrill Lynch. [ID:nN25267831]

As the testimony in the U.S. House of Representatives Oversight and Government Reform Committee wore on, however, analysts' concerns receded and stocks added to gains.

"There has been nothing in his testimony that has confirmed conspiratory theorists that he overstepped his authority," said Peter Kenny, a managing director at Knight Equity Markets in Jersey City, New Jersey.

Lennar (LEN.N) shares shot up 17.5 percent after it posted a wider quarterly loss, but also reported an increase in new home sales and orders. [ID:nBNG21059]

Bed Bath & Beyond Inc (BBBY.O) reported a surprising increase in quarterly profit as it cut costs to offset slumping demand, and its stock soared 9.5 percent.

WALL ST JUMPS, BUT EURO SHARES LAG

The Dow Jones industrial average .DJI closed up 172.54 points, or 2.08 percent, at 8,472.40. The Standard & Poor's 500 Index .SPX rose 19.32 points, or 2.14 percent, at 920.26. The Nasdaq Composite Index .IXIC gained 37.20 points, or 2.08 percent, at 1,829.54.

European shares closed lower, led by drugmakers and banks, after Asia-focussed Standard Chartered (STAN.L) said it remained cautious about the economic outlook despite record levels of income and profit in the first five months of the year.

The pan-European FTSEurofirst 300 .FTEU3 index of top shares declined 0.9 percent to end at 845.71.

The European Central Bank moved to lend banks 442.24 billion euros, its latest effort to boost liquidity, which led the bank-to-bank cost of borrowing euros to fall by the most in six months. Overnight euro Libor rates slumped by almost a percentage point to a record low.

The dollar slipped against a basket of major currencies, with the U.S. Dollar Index .DXY off 0.22 percent at 80.381.