Bank of America Breaks Out

Bank of America shares followed up a nearly double-digit percentage advance last week with a plus 2% gain on Monday, as the stock has outpaced its big bank peers of late.
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NEW YORK (

TheStreet

) -- Don't look now but

Bank of America

(BAC) - Get Report

shares are building up some momentum.

The stock was up 2.4% to close at $16.21 on Monday after a

federal judge begrudgingly approved a $150 million settlement

between the company and the

Securities and Exchange Commission

stemming from its disclosure of losses and bonus payments related to the acquisition of

Merrill Lynch

.

That move follows a stellar performance last week when shares jumped almost 10% to peek back above $16 on an intraday basis late last week for the first time since the company reported its fourth-quarter results on Jan. 20. Monday's close above $16 was its first at that level since the same date.

At Monday's session-peak of $16.40, the shares were 4.5% above their 50-day moving average of $15.60, as well as slightly beyond their 200-day moving average of $16.18, both bullish signs.

It's difficult to settle on a single news peg for the surge. Last week's headlines ran the gamut from news of progress in the company's efforts to adjust payments for problem mortgages, the release of regulatory filings that showed hedge fund managers mostly adding to their holdings of Bank of America stock in the fourth quarter, and analyst Meredith Whitney reportedly telling

CNBC

that the company was the "least worst" play among the big banks, among many others.

The

Federal Reserve's

decision after Thursday's closing bell to lift the interest rate it charges banks at the discount window got a lot of attention for what it means from a psychological standpoint as a vote of confidence that financial markets have stabilized, but it's not viewed as a game-changer for the banks in the near-term.

Still, Morgan Stanley came out with positive comments on the big banks Friday following the news, saying the Fed's decision "supports our call that credit is improving and rates should rise in 2010," and that it likes the banks ahead of any hike in the fed funds rate.

Bank of America was one of the banks that Morgan Stanley, which is overweight the large-cap bank sector, mentioned specifically as worthy of a "more positive bias" to rising rates along with

JPMorgan Chase

(JPM) - Get Report

, both of which it expects to see benefits early in the cycle of credit improvement. Both stocks are rated overweight at Morgan Stanley.

Other banks that the firm singled out included

Bank of New York Mellon

(BK) - Get Report

, and

Northern Trust

(NTRS) - Get Report

, both of which will see benefits from being able to cease waiving fees for money-market funds; and

Wells Fargo

(WFC) - Get Report

and

PNC Financial

(PNC) - Get Report

, which should see improved efficiencies from their major acquisitions of Wachovia and National City, respectively.

The most interesting aspect of Bank of America's breakout is perhaps that the stock ran so far ahead of its peers last week.

Citigroup's

(C) - Get Report

stock appreciated 7.5% in the holiday-shortened week, then rose another 1.2% on Monday, but being under $5, the shares tend to move more dramatically on a percentage basis. As for the rest of the big banks, JPMorgan tacked on 2.5% last week, and another 2% on Monday, but

Goldman Sachs

(GS) - Get Report

,

Morgan Stanley

(MS) - Get Report

, and Wells Fargo all rose less than 2% last week.

As the February draws to a close, the musing about how the first quarter is shaping up will begin. The current mean estimate of analysts polled by

Thomson Reuters

is for earnings of 9 cents a share in the March period on revenue of $27.8 billion.

Even an in-line performance in the current quarter would represent a fair improvement from Bank of America's disappointing fourth-quarter results, when it came in with a wider than anticipated loss of 60 cents a share and fell 7% short of consensus revenue view, and would go a long way toward justifying the recent run-up in the stock should these gains hold or continue to build ahead of the release.

--

Written by Michael Baron in New York.