How Bank of America Helped Send the Dow Higher

First-quarter earnings reports are finally here, but before the first release of the official earnings season came this afternoon, the Dow Jones Industrials (DJINDICES: ^DJI  ) managed to start things off on an optimistic note, rising 48 points even as many analysts fear that any slowdown in earnings could trigger a reversal in the stock market's impressive gains over the past four years. Broader market measures rose more substantially, with gains of more than half a percent for the S&P 500 and Nasdaq Composite.

The biggest percentage gainer in the Dow was Bank of America (NYSE: BAC  ) , which climbed 2%. Despite having acquired a terrible image from its needing bailout support and its attempts to raise income in the aftermath of the financial crisis, B of A has been reworking its image, and Fool contributor Amanda Alix points to "super-branches" with luxury accoutrements as well as more advanced ATM technology as evidence that the bank has learned from its past missteps.

Elsewhere in the financial sector, AIG (NYSE: AIG  ) climbed nearly 4% to a 52-week high as the company seeks to block a potential shareholder derivative lawsuit that former chairman and CEO Hank Greenberg wants to file against the U.S. government. Greenberg seeks to argue that the terms of the government's bailout of the insurance company were unfair to AIG, but AIG correctly anticipates a huge potential outcry from outraged taxpayers if such a suit were to go forward. Meanwhile, AIG also completed the sale of its American Fuji Fire and Marine subsidiary to White Mountains Insurance, with the deal that was announced last year having had to wait for regulatory approval before proceeding. AIG has done a good job of recovering from the financial crisis by concentrating on its core business, and investors who got in after the financial meltdown have reaped the benefits.

Finally, Weatherford International (NYSE: WFT  ) rose nearly 4% on the heels of General Electric's (NYSE: GE  ) deal to buy Lufkin Industries announced this morning. As a fellow oil-services provider, Weatherford is rising on speculation that merger and acquisition activity in the space could rise as a result of the GE acquisition. Yet GE almost certainly wouldn't be interested after having bought Lufkin, and with Weatherford's market cap of nearly $10 billion, it would take a similarly big buyer to pull off a buyout of that size. It's hard to see Weatherford as an acquisition candidate even after the Lufkin buyout.

Today's gains add to the huge returns that investors have earned as Bank of America's stock doubled in 2012. Are there more gains 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.


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