Why Bank of America Is Struggling Today

It's only been a week since Bank of America (NYSE: BAC  ) and its compatriots got a big bump from positive Fed stress test results. It had been on an upward climb following its combined  $10.5 billion share repurchase plans until yesterday, when the bank suddenly began falling. Currently hovering around breakeven, Bank of America is struggling to maintain its gains from earlier in the week.

Though largely assuaged, investor concerns over the Cyprus economy may still be a factor in the financial sector's moves -- especially next week if the country's government cannot find a resolution to their problems before Monday. Today's moves, however, show a wavering of investor confidence as the bank faces yet another test in court.

Bank of America, along with JPMorgan (NYSE: JPM  ) and Citigroup (NYSE: C  ) , has been named in a suit filed by Freddie Mac alleging that the banks were involved in the rigging of the widely used LIBOR rate. The case states that the banks colluded in order to artificially suppress the interest rate from Aug. 2007 to May 2010 in order to not only inflate their profits but to hide their growing financial problems. It is estimated that both Freddie Mac and Fannie Mae have lost as much as $3 billion to $1 trillion in losses from mortgage securities and other investments tied to LIBOR. 

Though JPMorgan and Citigroup are both up today in trading, all three banks have dropped since the suit was announced on Wednesday and subsequently filed on Thursday:

Bank % Decline
Bank of America 1.64%
Citigroup 1.87%
JPMorgan

1.57%

Source: Yahoo! Finance

This latest lawsuit for Bank of America brings back the dark cloud that's been hovering over the company since the financial crisis. Many analysts believed that the worst of its legal woes were behind it, but this new round of court activity may put that theory in the trash. Still, there has been plenty of positive lip service for the bank in recent days. Meredith Whitney was back in the news as she predicted that B of A could rise to $20. Others suspect that the stock will move to the high teens in the next 12 months, bringing the bank's price closer to its tangible book value.

As most here at the Fool would tell you, basing any investment decision on one day's price movements would be foolish (note the lowercase "f"), but being educated on the factors that can move your stock's price will help to make you a better investor, capable of weathering the price fluctuations of any particular day. And today's moves are a big indication of a serious threat to Bank of America's recent highs. Keep an ear out for further developments on the Freddie case, as this will have a definite impact on Bank of America's price.

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, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.


Read/Post Comments (8) | Recommend This Article (6)

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  • Report this Comment On March 23, 2013, at 1:41 AM, mholtzman101 wrote:

    BAC was down $0.01 today. Are you kidding me with your article above. You don't know anything about this stock. What a friggin' joke your article is. I can't believe that they let you write your articles under their brand name. You think that they would have better quality control on this, but to be honest, I'm really close to ignoring anyone writing on Motley Fool. Good riddance.

  • Report this Comment On March 23, 2013, at 3:13 AM, bashersuit wrote:

    We have been seeing these articles 'don't buy BAC' articles since the stock was $5

    I agree with Dick Bove..Buy BAC and hold it. it's the most undervalued back stock!

    see you at $30 in a couple of years

  • Report this Comment On March 23, 2013, at 7:43 AM, ManishGuptePhD wrote:

    I am being gang stalked and victimized. Whaling efforts! "Morgan bank" account in US and Citizen's bank (RBS) will have to be investigated..

  • Report this Comment On March 23, 2013, at 8:25 AM, Rusty56 wrote:

    mholtz - You are correct, end of story.

  • Report this Comment On March 23, 2013, at 8:27 AM, Rusty56 wrote:

    mholtz - you are right, just baseless info.

  • Report this Comment On March 23, 2013, at 10:42 AM, Jesusa2000 wrote:

    So, Bank of America robs, pillages and rapes, gets another infusion of phoney money and things are great...for 5 seconds. Then, it tanks again. And we're not even going to talk about JP lost 6 BILLION dollars Morgan. By next month, both will be in front of CONgress demanding that they be bailed out. And Cantor & Ryan will give it to them. This time, they'll come after your cash not your tax dollars (if you've got any left) and if you don't give it up, Obama will enforce it with night raids and drones. When are people going to realize that the entire banking system is nothing but a Ponzi scheme run by Bernie Madoffs? Close the banks! Nationalize them and put the banksters in jail for life. Oh, yeah, and do the same to the lobbyists and CONgress critters while you're at it.

  • Report this Comment On March 23, 2013, at 11:40 AM, joanofarc13 wrote:

    Bank of America haspened scientology & kabbalah. in the 80' s. Loans were drawn up erstwhile illegitemate ipo' d co-signee'd sponsors held unaccounted. for forming overrun unpaid loans.When American does it away in roes with both societies, bank of America business shall returnee to the enterprise of business as usual. Do you not believe such parasitic duchies destroyed. UPS, Boeing stock's and product, the United School District's of Education in the USA., mired the Supreme Court & Municipalities System + American Local Library System's. Enough with blaming it on pointblank government plinth.Caroline Kennedy, Maria Shriver, and Margaret Hoover are scientology's top tier systemic system.

  • Report this Comment On March 23, 2013, at 1:53 PM, usedbyBOA wrote:

    Bank of America does a lot of fishy things in my opinion. For example they are fraudulantly using my name as a Trustee on forclosed properties. I have call the law firm here in the state I live in that is handling thier forcloseures. The law firms just tell me there is nothing to worry about, that is not going to bother me in anyway. You have to be a Lawer to be a Trustee I'm pretty sure. Even though the law firm handling thier forclosures knows that they are using my name fraudulantly they still continue to do the paperwork for BanK of America, this has been going on for a few years now and I can't get them to stop using my name. If there are any lawyers out there that read this and would like to do something to help me get them to stop this practice. The law firm I have contacted doing thier forcloseures is fully aware that they are falsely using my idenity. Anybody out there that would like to help me out please contact me. contact info-spiritmandeluxe2002@yahoo.com

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