NEW YORK (AP) - Stocks rebounded Thursday as bullish congressional testimony from Alan Greenspan and anticipation for a strong midquarter update from Intel Corp. brightened Wall Street's mood and overshadowed a surge in oil prices.
The Federal Reserve chairman told lawmakers the economy seems to be on "reasonably firm footing,'' with inflation under control.
His generally positive assessment supports the view that the Fed, which has raised interest rates eight times over the past year, will likely continue nudging rates higher at a gradual pace.
Fed policy-makers are widely expected to raise the federal funds rate by another quarter-point to 3.25 percent at their next meeting, set for June 29-30.
"Once everyone sifted through all the comments, the realization was that he hasn't changed his thoughts about the economy,'' said Peter Cardillo, chief strategist at S.W. Bach & Co. in New York.
"He doesn't think the economy is ready to fall off a cliff, and that's basically a strong fundamental for the stock market.''
The Dow Jones industrial average rose 26.16, or 0.2 percent, to 10,503.02, after spending the first part of the session in negative territory.
The broader gauges also closed higher.
The Standard & Poor's 500 index was up 6.26, or 0.52 percent, at 1,200.93.
The Nasdaq composite index added 16.73, or 0.8 percent, to 2,076.91.
Greenspan's remarks had some analysts speculating that the Fed would likely continue raising short-term rates through the third quarter, perhaps to the 4 percent level.
With the rate cycle's end in sight, stock investors can look forward to more stability, said Hans F. Olsen, chief investment officer at Bingham Legg Advisers, a private wealth management firm in Boston.
"You can start to see the end is near ... The interest rate increase regime is coming to a close, and that is an unambiguous positive development for equities,'' Olsen said.
"For the balance of the year, I think that sets us up for a good second half.''
Bonds were moderately lower, however.
The yield on the 10-year note rose to 3.95 percent from 3.94 percent late Wednesday.
The dollar was higher against other major currencies and gold prices fell.
Crude oil surged $1.74 to settle at $54.28 per barrel on the New York Mercantile Exchange a day after posting a steep decline.
The Labor Department reported that the number of people filing new claims for unemployment benefits fell by 21,000 last week, the biggest decline in seven weeks.
Analysts attributed the improvement to fewer layoffs in the auto industry and a shortened workweek because of the Memorial Day holiday, which gave unemployed workers one less day to file claims.
In company news, Intel boosted its second-quarter revenue forecast on better-than-expected demand for its notebook computer chips, a sign that the semiconductor industry is gaining strength after a downturn last year.
The Dow component expects sales to be between $9.1 billion and $9.3 billion for the period ending July 2, at the upper end of the $8.6 billion to $9.2 billion range it forecast in April. Analysts, on average, are expecting sales of about $8.99 billion, according to a survey by Thomson Financial.
Intel, which advanced 2.2 percent, or 60 cents, to $27.70 in the regular session, shed 23 cents in after-hours trading.
Computer Associates International Inc. was up a penny at $27.01 after the company said it had agreed to acquire Niku Corp., a provider of information technology management and governance software, for $350 million in cash.
The acquisition would give Computer Associates, one of the world's largest business software companies, a foothold in the fast-growing market for information technology governance.
Niku soared 25 percent, or $4.16, to $20.66.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange.
Volume was at 1.43 billion shares, compared with 1.33 billion traded at the same point Wednesday.
The Russell 2000 index, which tracks smaller company stocks, was up 5.76, or 0.93 percent, at 626.23. - AP
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