Why Bank of America Blasted Off

Before you go, we thought you'd like these...
Before you go close icon

It was a day of milestones for the market.

We were surprised on Friday morning by a positive jobs report. The resulting unemployment rate fell from 8.5% to 8.3%, a three-year low.

That drove the Dow Jones Industrial Average (INDEX: ^DJI) up 1.23% to 12,862.23; the S&P 500 (INDEX: ^GSPC) up 1.46% to 1,344.90; and the Nasdaq (INDEX: ^IXIC) up 1.61% to 2,905.66.

The Dow saw highs it hasn't seen since May 2008. The Nasdaq? December 2000!

Bank of America leads the way
All but two of the Dow's 30 components were up for the day, but Bank of America (NYS: BAC) was by far the biggest winner, up 5.2%. It also led all gainers for the week at 7.5%. And year-to-date (basically a month), it's up a whopping 41%!

Today reinforces that good news for the economy is good news for banking and great news for the banking laggards. Fellow doghouse tenant Citigroup (NYS: C) was up 4.8% Friday (28% for the year).

To keep things in perspective, Bank of America's shares have been beaten down so low that a 41% gain still has them trading at just over half of 52-week highs.

If we're in the middle of a strong economic recovery, Bank of America and Citigroup shares could be given huge boosts. On the other hand, if European woes or Chinese bubbles throw the world economy into a tailspin, B of A and Citi will have their work cut out for them.

The bottom line
I'm bullish on shares of both Bank of America and Citigroup barring an economic meltdown, but they're quite complex and opaque. So tread carefully.

For a much less complex bank that has some of the best operational numbers I've ever seen. It's featured in our brand new free report: "The Stocks Only the Smartest Investors Are Buying." I invite you to take a free copy to find out the name of the small bank I believe Warren Buffett would be interested in if he could still invest in small banks.

At the time this article was published Anand Chokkaveluowns shares Bank of America and Citigroup. He also owns warrants in JPMorgan as well as long-dated options in Bank of America. The Motley Fool owns shares of Bank of America and Citigroup. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners