Bank of America and Friends Win Big

Shortly after the bell, Bank of America (NYSE: BAC  ) is on track to regain the 1% it lost yesterday. Though it does appear that the bank may be moving along with the market, there is one big headline that might be swaying the bank's investors toward the positive end of the spectrum.

A little perspective
B of A isn't the only bank that's trending higher this morning. The KBW Bank Index (DJINDICES: ^BKX  ) is trading at a 1.1% gain, while the other Big Four banks are all up in trading:

  • Wells Fargo is up 0.89%.
  • JPMorgan Chase  (NYSE: JPM  )  is enjoying a 1.44% gain.
  • Citigroup (NYSE: C  )  is leading the pack with a 1.49% gain.

Bank of America does often trade at higher volumes than the other bank, and with a beta of 1.78, that trading can lead to exaggerated moves compared to the broader markets. But today is a little different.

Care to swap?
Yesterday, the Commodity Futures Trading Commission voted on updated rules for the trading of credit-default, interest rate, and commodity swaps -- a $633 trillion global market. The new rules establish a swap trading platform that is closer to an exchange, allowing for more transparency in pricing. This is a big win for the banks, who have been lobbying the commission hard for changes to Dodd-Frank that would have implemented stricter rules. In the U.S., B of A, JPMorgan, and Citigroup are three of the top five banks in the swap market, which control 95% of the trades.

Other news
Bank of America may also be enjoying another boost in investor confidence this morning after Fitch reiterated the bank's varios ratings for credit worthiness and other measures. The agency upgraded B of A's credit worthiness ranking to "A-" from "BBB+." The continued resolution of the bank's legal matters has solidified its recovery and helped improve its Fitch ratings. The company's Tier 1 common capital ratio under the Basel III requirements was also higher than the agency expected, adding to its momentum.

Just another day
It's great that the headlines are helping to instill some more investor confidence in the bank, pushing the stock higher. But remember, it's just another day of trading, and Monday could bring news that pulls the stock down once more. The news of the swap rule changes is a big one for the controlling banks, but since they already have such a large market share, there may be little chance that the rules do anything other than allow them to maintain current rates of trading. As a Foolish investor, keep your eye on the ball (aka, the bank's fundamentals) and decide which headlines really affect your investment.

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.


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