Wall Street is seeing some of its worries about banks ease now that Bank of America Corp. was able to raise billions of dollars in capital.
The bank said late Tuesday that in less than two weeks it had raised $13.47 billion through the sale of 1.25 billion shares. That helped put the company more than halfway toward raising the money the government said was necessary based on a review of the bank’s books.
Bank of America is one of the nation’s biggest banks and its ability to raise cash is a welcome sign for traders still worried about how it will fare if consumers fall behind on more debt from mortgages to credit cards.
The government found in its recent “stress tests” on the nation’s 19 largest financial companies that Bank of America would need $33.9 billion to protect against losses if the economy worsened. That was more than any other bank reviewed. The company already raised $7.3 billion from the sale of a business in Asia since the government issued its report cards for banks on May 7.
Regional bank Regions Financial Corp. said Wednesday it plans to raise $1.25 billion in capital to meet the government’s requirement.
The stability of banks and an increase in lending that could result are seen as crucial to a sustained recovery in the economy. Bank of America shares rose 6 percent in the early going.
Subodh Kumar, an independent investment strategist in Toronto, said it is an encouraging sign that banks have been able to turn to the stock market to raise capital. But he said for the market to hold is gains investors will need to more signs of improving in the economy.
“This looks more like a market that needs the fundamentals to catch up with it,” he said.
In the first half-hour of trading, the Dow Jones industrial average rose 63.95, or 0.8 percent, to 8,538.80. The Standard & Poor’s 500 index rose 10.00, or 1.1 percent, to 918.13, and the Nasdaq composite index rose 17.54, or 1 percent, to 1,752.08.
Stocks finished narrowly mixed Tuesday after a record low in housing construction stirred unease about the economy’s direction. The Standard & Poor’s 500 index has rallied 34.2 percent since March 9 as investors have set aside some of their biggest worries about the economy sliding into a depression.
Investors are again looking to Washington. Treasury Secretary Timothy Geithner projected financial institutions would repay $25 billion of loans in the next year that were part of the government’s financial rescue plan. In prepared testimony for the Senate Banking Committee, Geithner said the money will be used to further assist institutions in need of government help.
Minutes are also due at 2 p.m. Eastern from the Federal Reserve’s April meeting.
President Barack Obama is also scheduled to attend the first quarterly meeting of his Economic Recovery Advisory Board. The board’s presentation is expected to focus on energy and jobs. Paul Volcker, former chairman of the Federal Reserve, is chairman of the 16-member advisory board.
Copyright 2009 The Associated Press.
