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Why Bank of America Is Up Today

By John Grgurich - Apr 10, 2013 at 3:54PM

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Could investors be cheering a multibillion-dollar settlement?

Closing in on the end of the trading day, Bank of America (BAC 0.95%) share prices are up 0.33%. They've been on the climb since last Friday, following a dramatic dip in share prices across all the big banks last Wednesday that I have yet to find a good explanation for.

At the risk of looking a gift horse in the mouth, here are a few thoughts as to why B of A and its big-four peers are doing so much better than they were this time last week.

Hale and hearty all around
But first, here's a quick overview of the rest of the big four and the markets:

  • Citigroup (C -0.87%) is up a big 2.61%.
  • JPMorgan Chase (JPM 1.41%) is up a healthy 1.21%.
  • And Wells Fargo (WFC 0.64%) is up a solid 0.63%.

The markets are generally feeling hale and hearty, as well:

  • The Dow Jones Industrial Average is up 0.90%.
  • The S&P 500 is up 1.11%
  • And the Nasdaq is up 1.73%.

Defying expectations
So first, the markets are all up. And when the markets are all up, chances are your favorite stocks, like B of A, are going to be up as well. Or is it the other way around? It's a virtuous circle, is the answer, at least for today. On other days, it's a vicious cycle, and the markets and your favorite stocks are all down.

Earnings season is about to start, too. To kick things off in the banking sector, JPMorgan and Wells Fargo both report this Friday. This can affect stocks in two ways: Investors feel frightened at what they might hear, or hopeful.

By what we're seeing with B of A's performance today, as well as with that of the superbank's peers, it seems that investors are looking forward to the prospect of first-quarter earnings reports. Going on that theory, Citi investors must be feeling particularly hopeful, and well they should be: Last quarter's earnings were startlingly good.

But in some ways, B of A's performance this week is defying expectations. Last Friday news broke that a federal judge signed off on a $2.43 billion settlement B of A made with investors over allegations the big bank misled them when it bought Merrill Lynch. Now, the settlement was reached last fall, so it's possible the market vented its fury at the deal then, but still, this news could have been a painful reminder.

Or maybe the markets are hoping that, with this multibillion-dollar judicial signoff, B of A is well on its way to putting the worst of its financial-crisis cleanup behind it. I don't think the bank is there yet, but a lot of investors do.

In the end, remember that the markets work in mysterious ways: One week your favorite stocks are up, and the next they're down. As a Foolish investor, you're in it for the long term. Keep an eye on company fundamentals, and leave the rest to time.

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Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$37.02 (0.95%) $0.35
Citigroup Inc. Stock Quote
Citigroup Inc.
C
$53.62 (-0.87%) $0.47
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$131.27 (1.41%) $1.83
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$45.89 (0.64%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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