Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Dow's Rally May Signal False Sense of Security

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

After closing with losses for the third week out of the last four, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is soaring this morning. Up 171 points as of 11:30 a.m. EDT, the index is pushing forward as investors look ahead to tomorrow's Federal Open Markets Committee meeting. Speculation continues over the Fed's next move for its stimulus program, but may be starting to look on the bright side. Positive outlooks and some good news from the housing market are also helping the Dow's financial component stocks reclaim some of their big losses from last week.

Big Ben
Though we won't hear anything formally from Ben Bernanke until Wednesday, tomorrow's meeting is a big event for investors who have been tough at work trying to decipher economic news since Bernanke's last statements on the plans for continued stimulus. While it's been a tough job, the speculation has prepared some investors for what's to come, though today's big gains signal another story. As stocks soar higher, sentiment toward the Fed's approach to changes becomes clear -- it's not going to happen this week.

Be careful if you read too much into this morning's rally, though, since Mr. Market doesn't actually know what's going to happen in the FOMC meeting. And investors who are banking on the current levels of bond repurchases remaining the same this morning could be sorely disappointed as the week goes on.

Good start
After closing last week with some big losses, the Big Four banks are back in full gear this morning. Bank of America (NYSE: BAC  ) and JPMorgan (NYSE: JPM  ) may not be the biggest winners of the Dow components, but they're in the top 10. Both banks, along with Citigroup (NYSE: C  ) , were facing new international issues last week when Singapore officials announced a list of 20 banks that may have been involved in rate rigging, much like last year's LIBOR scandal. Though none of the banks have been officially implicated in the scheme, new scrutiny from various international authorities could bring more legal woes to the banks.

Some good news started off this week, though, as homebuilders' sentiment rose above the 50 mark for the first time since the recession began. This is great news for the housing market, which has seen both inventory of houses fall and prices rise. With new homes being built, banks can benefit in various ways: lending to construction firms, new mortgages, etc. And home prices have even driven the banks to hurry up and finalize a number of foreclosures -- allowing them to resell homes at higher values.

Though B of A doesn't have quite the hold on the mortgage market that it would like -- Wells Fargo (NYSE: WFC  ) and JPMorgan command the lead in new mortgage origination -- it is taking steps (like cross-selling) to expand its presence. So the continued success in the housing market could help its efforts to gain traction again.

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 (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2493316, ~/Articles/ArticleHandler.aspx, 9/26/2016 5:03:11 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:55 PM
^DJI $18261.45 Down -131.01 -0.71%
BAC $15.52 Down -0.08 -0.51%
Bank of America CAPS Rating: ****
C $47.15 Up +0.04 +0.08%
Citigroup CAPS Rating: ***
JPM $67.25 Down -0.14 -0.21%
JPMorgan Chase CAPS Rating: ****
WFC $45.74 Up +0.02 +0.04%
Wells Fargo CAPS Rating: ****