It's been a big week not just for Wall Street -- what with the Dow Jones Industrial Average hitting a new all-time high -- but for Bank of America (NYSE: BAC ) , too, which is so far set to finish the trading week up a whopping 6.65%.
Thank general energy, enthusiasm, and some not-so-stressful Federal Reserve tests.
The tale of the tickers
But before we get to the hows and whys of B of A's big week, let's take a quick look at where its peers and the market overall are shaking out for the week:
- Up by a massive 8.71%, Citigroup has had an even better week than B of A.
- JPMorgan Chase looks set to finish up just a little more than two percentage points, at 2.29%.
- Wells Fargo is up almost three points, currently at 2.78%.
All three major indices are in the green, as well:
- The S&P 500 is up 2.23%.
- The Dow is up 2.32%.
- And the Nasdaq is up 2.48%.
Fingers more than crossed for buybacks and dividends
We have two separate happenings playing into B of A's big performance this week. First, we're in a bull moment right now overall. The Dow hit a new all-time high this week. Investor confidence is obviously strong, and when investors see other investors jumping into the market, they want to follow suit.
As indices drive higher, more investors plunk their money down. And as more investors plunk their money down, indices are driven higher, which draw more investors in. Energy -- whether positive or negative -- attracts like energy.
The second big happening relates to Federal Reserve stress test results. Bank investors have been on collective pins and needles waiting to see how their banks will perform, and whether or not said banks will engage in a fresh round of share buybacks or increased dividends.
Yesterday, the Fed released part one of its stress test results: measuring how well banks might perform under a severe financial and economic downturn, similar to that experienced in 2008. How did B of A do?
In a nutshell, the superbank comfortably passed the core stress test, coming through with a tier-one common-equity capital reserve, as measured against risk-weighted assets, of 6.8%. The minimum regulatory standard was 5%. Incredibly, B of A even beat JPMorgan Chase (NYSE: JPM ) -- that paragon of disciplined lending that emerged so strongly from the financial crisis -- with its tier one common equity ratio of just 6.3%.
B of A also beat the pants off Goldman Sachs (NYSE: GS ) -- another bank that is typically seen as perennially strong and resilient -- but that only managed a tier-one common-equity ratio of 5.8%. Wells Fargo (NYSE: WFC ) just edged B of A out -- another bank everyone expects to perform brilliantly on stress tests -- coming in at an even 7%.
But the big surprise may have been Citigroup (NYSE: C ) , with its tier-one common-equity ratio of 8.3%. The bank was expected to do well -- or at the very least, better than least year -- and it did not disappoint.
Foolish bottom line
B of A currently pays a dividend of merely 0.3%. Investors would sure like to see a bit more than that coming their way after this year's stress test results, or some share buybacks, and this week's share-price performance indicates that's exactly what they think might happen.
But investors will have to wait until next week to find out for sure: when the Fed's second round of stress test announcements -- those dealing with share-buyback and dividend plans -- are made.
But always remember, Foolish investors, that you're in this for the long haul. Whether its B of A or Coca-Cola, your favorite stocks are going to spike and drop on a regular basis. But so long as the companies you're invested in have strong fundamentals, and you still believe in their missions, your money is in the right place.
Looking for more in-depth analysis of Bank of America? While it's stock did double last year, there are still significant challenges that lie ahead. As such, it's critical to have a solid understanding of this megabank before you make any moves to buy, hold, or sell.
In this new Motley Fool 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, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy, and as an added bonus, you'll receive a full year of free updates and expert guidance as key news breaks.