“Up, up, and away!” The classic Superman quote could well describe what’s going on with Bank of America Corp (NYSE:BAC)‘s share price. The Dow is reaching new heights and bringing everyone else along for the ride, or vice-versa — however you want to look at those kinds of things.
But there’s another potential force at work in the financials sector that could also be boosting B of A’s numbers today, and it’s not as stressful as it at first sounds.
First, a quick overview of B of A’s peers and the market overall. Here’s where everyone and everything is shaking out so far, about midway through the trading day:
- Bank of America Corp (NYSE:BAC) — our group leader — is up a big 2.60%.
- Citigroup Inc. (NYSE:C) is up a healthy 1.58%. (Maybe investors are reacting positively to CEO Michael Corbat’s boring but needed statement about how he’s going to measure executive performance moving forward.)
- JPMorgan Chase & Co. (NYSE:JPM) is up an uninspiring 0.57%, but up nonetheless.
- Wells Fargo & Co (NYSE:WFC) finishes out today’s big-bank survey, up an equally uninspiring 0.54%.
The market overall is slightly more mixed, with the Dow Jones Industrial Average up 0.22%; the S&P 500 is up 0.03%, and the Nasdaq is just under break-even: down 0.12%.
Not-so-stressful tests
So, the market is booming, and maybe these banks are just coming along for the ride, but there’s potentially something else milling around investors’ minds today, a little something that might also be helping B of A and friends along: upcoming stress-test results.
Starting in 2012 — as a direct result of the financial crash and the Dodd-Frank Wall Street Reform and Consumer Protection Act — the Federal Reserve began conducting what it calls “stress tests” on the country’s biggest banks. Known more formally as the “Comprehensive Capital Analysis and Review,” the idea is to put banks under the simulated pressure of a severe financial and economic crisis and measure how well they perform.
As the Fed itself puts it, the stress tests “evaluate the capital planning processes and capital adequacy of the largest bank holding companies.” Last year, Bank of America Corp (NYSE:BAC) passed its stress test, but not exactly with flying colors.
The hope this year — and the expectation — is that B of A’s CCAR numbers will be much better, boosting general confidence in the bank overall, and perhaps prompting leadership to boost the current, paltry dividend of 0.4% higher.
But always remember, Fools, that even the strongest performing stocks have their up days and their down days. You’re in this for the long term. So long as the companies you’re invested in have strong fundamentals, and you believe in them, your money is in the right place.
The article Why Bank of America Is Soaring Like Superman Today originally appeared on Fool.com and is written by John Grgurich.
Fool contributor John Grgurich owns shares of JPMorgan Chase. Follow John’s dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich.The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
