Bank of America's Surprisingly Big Week

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An hour and a half into the final day of trading, shares in Bank of America (NYSE: BAC  ) are up 4.3% since last Friday's close: surprising considering the general market turmoil we've been seeing, but perhaps also unsurprising considering the dearth of bad news lately for the country's second-largest bank.

Riding a tasty wave
When the Federal Reserve announced a plan on June 19 to possibly begin tapering quantitative easing later this year, the markets freaked out -- the bond markets in particular, but the equity markets, too. The bond markets are still in turmoil, but the equity markets turned themselves around -- or at least stabilized -- in relatively short order.

And with Wednesday's release of the minutes from that June 19 Federal Open Market Committee meeting, in which investors read an assurance from the Fed that it wouldn't be too hasty with tapering, the markets really boomed. Right now, U.S. stocks are set for their third straight week of net gain. B of A is riding this market wave, and is so far up 0.8% on the day.

No news is good news
In terms of breaking news, it's also a quiet time right now for B of A, with no announcements of any lawsuits, fines, or regulatory actions to dampen investor spirits. That said, the there's still the pending trial with AIG (NYSE: AIG  ) to consider.

This is the suit filed by the insurance giant over -- what else? -- soured mortgages. And while that was supposed to have been settled back in 2011, to the tune of an $8.5 billion payout on the part of B of A, AIG fought to get a fresh trial over the matter back into court, angling for a bigger payout. The trial began in early June and was put on hold because of scheduling conflicts on the part of the judge.

Out of sight, out of mind. No news is good news. However you want think about it, this issue is not on the minds of B of A investors, and it won't be until more news on it breaks.

Foolish bottom line
Next up for B of A and its investors is second-quarter earnings, due to be released next Wednesday. JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) both reported today, with each claiming better-than-expected profits. But JPMorgan CEO Jamie Dimon warned strongly of a "dramatic reduction in future mortgage profits from higher interest rates." 

Wells and JPMorgan are the country's two biggest home lenders, but mortgages are a big part of B of A's business, too. Expect the worst damage from rising interest rates to affect all of the big banks -- including B of A -- in the third quarter. For now, out of sight, out of mind. 

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  • Report this Comment On July 12, 2013, at 7:55 PM, jgetze wrote:

    Damage from higher rates? Ha. The banks can't wait for rates to rise.

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