The Dow Bounces Back, Led by a Berkowitz Favorite

The Dow is on the rebound today after the ISM Non-Manufacturing index signaled economic expansion. At the halfway point of the trading day, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) was up 105 points, or 0.75%, to 13,984. The S&P 500 (SNPINDEX: ^GSPC  ) was up just shy of 1%.

At 10 a.m. EST, the Institute for Supply Management reported that its Non-Manufacturing index fell 0.5 percentage points to 55.2%. That's down from December's 55.7% but above analyst expectations of 55%. Any reading higher than 50% indicates economic growth, with higher numbers meaning faster growth. The drop in the index to 55.2% indicates that responders believe the economy is still growing but at a slower rate than in December.

ISM Non-Manufacturing Index Chart

ISM Non-Manufacturing Index data by YCharts.

Yesterday's across-the-board decline was the Dow's worst performance so far in 2013. The index sank 0.93%, only one of its 30 components escaping the landslide. In stark contrast to yesterday, 28 of the 30 Dow stocks are up today, with only IBM and United Technologies in the red.

Today's Dow leader
Today's Dow leader is Bank of America (NYSE: BAC  ) , up 3.1%. Banks' financial results are highly dependent upon the health of the economy, so financial stocks are up on today's relatively positive economic news. Bank of America reported earnings two weeks ago that left much to be desired. The company is still making progress, however, and many investors believe patience will be rewarded. Among them is star mutual-fund manager Bruce Berkowitz, who has a massive position in the company. At the Columbia Student Investment Management Association conference on Friday, Berkowitz laid out his reasons why Bank of America is one of his top three holdings, accounting for almost 9% of his fund.

Berkowitz believes Bank of America has done a great job of taking charges against bad assets and dealing with its numerous other legal problems. With the stock trading below book value and the business improving, Berkowitz thinks he could end up quadrupling his money on Bank of America. On a side note, he thinks just as highly of AIG, which makes up nearly 40% of his portfolio.

In an unusual step for mutual fund managers, Berkowitz closed his fund to new investors last week. Berkowitz believes he will make huge amounts of money on his AIG and Bank of America stakes and doesn't want his returns diluted by new investors entering the fund.

To learn more about Berkowitz's favorite bank, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2236910, ~/Articles/ArticleHandler.aspx, 4/16/2014 12:42:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement