Wall Street rallies on Bernanke relief, consumer shares

By Caroline Valetkevitch

NEW YORK (Reuters) - Stocks rallied on Thursday as investors were relieved Fed Chairman Ben Bernanke withstood a barrage of pointed questions from Congress on the Bank of America-Merrill Lynch deal relatively unscathed.

Retailers and home builders led stocks higher for much of the session, helped by a surprising profit increase from retailer Bed Bath & Beyond Inc(BBBY.O). Energy companies' shares also rose as oil prices climbed above $70 a barrel.

Stocks extended gains shortly before midday as investors took Bernanke's hearing in stride. Despite lawmakers' criticisms of Bernanke, the Fed chairman is well liked on Wall Street and most analysts anticipate he will be reappointed.

The U.S. House of Representatives Oversight and Government Reform Committee questioned Bernanke on the Fed's role in Bank of America's takeover of Merrill Lynch, and whether he pressured Bank of America's CEO Ken Lewis to go through with the deal after Lewis raised objections.

"There was concern as to what might happen there. He seemed to give some pretty decent testimony; at least it didn't get out of hand," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.

The Dow Jones industrial average .DJI jumped 172.54 points, or 2.08 percent, to 8,472.40, snapping a four-day losing streak. The Standard & Poor's 500 Index .SPX gained 19.32 points, or 2.14 percent, to 920.26. The Nasdaq Composite Index .IXIC advanced 37.20 points, or 2.08 percent, to 1,829.54.

With the second quarter ending early next week, some portfolio managers have already begun their end-of-quarter "window dressing" of selling some shares with big losses and buying some of the quarter's best-performing stocks to help improve their returns. This Wall Street ritual also is likely to have helped ignite Thursday's rally.

The S&P 500 is up 36 percent from a 12-year closing low hit on March 9.