After digesting several economic data releases in the morning session, the U.S. stock market rallied to close at a modest gain.

The S&P 500 Index closed up 4.18 points, or 0.37 percent, at 1,122.97. The Dow Jones Industrial Average closed up 47.38 points, or 0.46 percent, at 10,444.14.

The S&P 500 Index briefly dipped into negative territory after the release of pending home sales, which dropped sharply.

However, like many previous recessions, the stock market quickly found buyers and rallied from the drop. For the next several hours, S&P 500 tested Wednesday's close of 1,118.79 several times and dropped slightly below it at 1:50 pm EST.

The index then rallied in the last two hours of the trading session to close up 0.37 percent for the day.

Retailers and financial stocks led the way while the basic materials and energy sector were weighed down by falling commodities prices.

Economic Data

Unemployment claims, released at 8:30 am EST, showed the first decline in three weeks, dropping 29,000 to 469,000 for the week ending in February 27.

Pending home sales unexpectedly dropped 7.6 percent in January while economists expected an increase. The report stated that additional declines are expected from abnormal weather conditions.

Experts including private firm ADP, which released its payroll report on Wednesday, expect the weather to also distort Friday's unemployment rate report.

Retailers

Retailers, however, were not bothered by the weather. According to Thomson Reuters, retailers reported a 4 percent year-on-year increase in February same stores sales, the biggest increase since November 2007.

Same stores sales for Ross (NASDAQ:ROST), whose shares closed up 3.26 percent, increased 11 percent. Same store sales at Abercrombie & Fitch (NYSE:ANF), whose shares closed up 14.57 percent, rose 5 percent. Target's (NYSE:TGT) same-store sales were up 2.4 percent, with share closing up 2.44 percent.

Urban Outfitters (NASDAQ:URBN) reported earnings of $0.45 per share for the fourth quarter, rising 92 percent year-on-year and beating estimates of $0.40. Sales grew 16 percent and same-store sales rose 9 percent for the quarter. Its shares closed up 2.81 percent.

Banks

Big banks performed well. Goldman Sachs (NYSE:GS) closed up 3.73 percent, Morgan Stanley (NYSE:MS) closed up 3.11 percent, and Citigroup (NYSE:C) closed up 0.88 percent.

According to a Bloomberg report Thursday, total global investment banking fees in 2009 increased 13 percent to $59.8 billion, up from $53.1 billion in 2008.

Citigroup CEO Vikram Pandit also testified before a Congressional Panel about the TARP funds his firm received.

Pandit thanked the taxpayers for the TARP funds, supported the general direction of financial regulatory reform under consideration by Congress, blamed short-sellers for Citi's woes during the financial crisis, and asserted that Citi's share prices reflected the government's plan to sell its shares.

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