Why Bank of America Is Soaring Like Superman Today

"Up, up, and away!" The classic Superman quote could well describe what's going on with Bank of America's (NYSE: BAC  ) share price. The Dow is reaching new heights and bringing everyone else along for the ride, or vice-versa -- however you want to look at those kinds of things.

But there's another potential force at work in the financials sector that could also be boosting B of A's numbers today, and it's not as stressful as it at first sounds.

The tale of the tickers
First, a quick overview of B of A's peers and the market overall. Here's where everyone and everything is shaking out so far, about midway through the trading day:

  • B of A -- our group leader -- is up a big 2.60%.
  • Citigroup (NYSE: C  ) is up a healthy 1.58%. (Maybe investors are reacting positively to CEO Michael Corbat's boring but needed statement about how he's going to measure executive performance moving forward.)
  • JPMorgan Chase is up an uninspiring 0.57%, but up nonetheless.
  • Wells Fargo finishes out today's big-bank survey, up an equally uninspiring 0.54%.

The market overall is slightly more mixed, with the Dow Jones Industrial Average up 0.22%; the S&P 500 is up 0.03%, and the Nasdaq is just under break-even: down 0.12%.

Not-so-stressful tests
So, the market is booming, and maybe these banks are just coming along for the ride, but there's potentially something else milling around investors' minds today, a little something that might also be helping B of A and friends along: upcoming stress-test results.

Starting in 2012 -- as a direct result of the financial crash and the Dodd-Frank Wall Street Reform and Consumer Protection Act -- the Federal Reserve began conducting what it calls "stress tests" on the country's biggest banks. Known more formally as the "Comprehensive Capital Analysis and Review," the idea is to put banks under the simulated pressure of a severe financial and economic crisis and measure how well they perform.

As the Fed itself puts it, the stress tests "evaluate the capital planning processes and capital adequacy of the largest bank holding companies." Last year, B of A passed its stress test, but not exactly with flying colors.

The hope this year -- and the expectation -- is that B of A's CCAR numbers will be much better, boosting general confidence in the bank overall, and perhaps prompting leadership to boost the current, paltry dividend of 0.4% higher.

But always remember, Fools, that even the strongest performing stocks have their up days and their down days. You're in this for the long term. So long as the companies you're invested in have strong fundamentals, and you believe in them, your money is in the right place.

Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank's operations, giving you three reasons to buy and three reasons to sell.  To claim your copy, simply click here now


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  • Report this Comment On March 06, 2013, at 3:01 PM, my2cents4u wrote:

    Why do commentators marvel at doublings, triplings, quadruplings in stock prices but neglect to mention, as in the case of BAC that these wondrous events occured in recovery after the price fell to 1/4th of it's value? Why can't anyone be objective and truthful in today's media? Why must every old cloth be re-spun as new??

  • Report this Comment On March 06, 2013, at 7:39 PM, XMFGrgurich wrote:

    It's true, at the beginning of last year, BAC stock was so cheap it had almost nowhere to go but up.

    That said, the fact that the stock did double in price in a year's time is significant to the people who held onto it through that time, and to investors who are just discovering the stock now.

    Cheers. Thanks for reading and for thinking.

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