Bank of America Stock Leads the Dow Higher

Updated

The Dow Jones Industrial Average is gaining as Bernanke's comments before Congress overshadow a poor housing market report. As of 1:25 p.m. EDT the Dow is up % to 15,471. The S&P 500 is up % to 1,682.

There were two U.S. economic releases today.

Report

Period

Result

Previous

Housing starts

June

836,000

928,000

Building permits

June

911,000

985,000

Housing starts fell 10% in June to a seasonally adjusted, annualized 836,000, far below analyst expectations of 950,000. Building permits fell 7.5% to a seasonally adjusted, annualized 911,000. It's important to note that both these numbers are still far above last year's levels: Housing starts were up 10.4% from last June's 757,000, and building permits were up 16% from last June's 785,000.


US Housing Starts Chart
US Housing Starts Chart

US Housing Starts data by YCharts.

We knew the housing market would be challenged by the rise in mortgage rates, which have now jumped to mid-2011 levels.

US 30 Year Mortgage Rate Chart
US 30 Year Mortgage Rate Chart

US 30 Year Mortgage Rate data by YCharts.

Homebuilders are still optimistic, but it remains to be seen whether the good times for the housing market will continue or the housing market will cool off.

The big news today is Ben Bernanke's testimony before the House Financial Services Committee. Bernanke reiterated his belief that the economy is steadily improving and that the Federal Reserve could begin tapering its $85 billion-per-month asset purchases by the end of the year. He emphasized that the Federal Reserve will continue its accommodative policies so long as is required to achieve the Federal Reserve's targets of 6.5% unemployment and 2% to 2.5% inflation.

Today's Dow leader
Today's Dow leader is Bank of America , up 3.4%. The bank reported strong earnings for the second quarter, which isn't much of a surprise, given how positive other banks' results have been so far this earnings season. While the bank took a hit from its holdings of government mortgage-backed securities, it reported a 70% rise in its earnings to $0.32 per share, beating analyst expectations of $0.25. Revenue rose 3.5% to $22.73 billion to top analyst expectations of $22.79 billion. Bank of America and other banks should benefit from the recent rise in interest rates as they borrow money at the Federal funds rate of 0.25% and lend money at higher long-term rates.

While many investors are nervous about investing in big banking stocks after the crash, the sector has one notable standout. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

The article Bank of America Stock Leads the Dow Higher originally appeared on Fool.com.

Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He owns shares of Bank of America. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Advertisement