BofA Stock Rises, as Capital Concerns Dim

Updated from 3:04 p.m. EDT

Bank of America (BAC) shares opened higher Wednesday, after signs the economy may be improving outweighed reports that regulators were telling the company it needs $34 billion in common equity.

BofA shares closed up 17.1% to $12.69, after payroll processor ADP estimated earlier in the day that there were 492,000 job losses in the private sector in April, well below the expectation for 645,000 and a downwardly revised 708,000 in March.

BofA and other banks stocks reversed steep declines in premarket trading, following the report. The sector had been weighed on by a late Tuesday report in The New York Times, citing an executive at the bank, that said regulators completing a stress test on the company determined it needs $34.9 billion in capital to withstand any worsening of the economy.

Paul Nolte, director of investments at Hinsdale Associates, attributed BofA's turn to positive territory in the premarket to the ADP report.

"If we're looking at a better economy, then maybe the stress test isn't that stressful," he said.

The Times reported that BofA could satisfy regulators' demands simply by converting the government's $45 billion preferred equity stake, acquired through the Troubled Asset Relief Program, into common shares. Doing so, however, would dilute existing common shareholders. Citigroup (C) and insurer American International Group (AIG) made similar moves earlier this year.

BofA has other options to raise capital, including selling assets. The amount it could expect through selling assets or more shares to the public, however, would not cover the amount regulators want it to raise -- leaving a conversion of preferred shares to common stock as the most likely option, The Wall Street Journal reports. That could leave the U.S. government as Bank of America's largest shareholder.