B of A Hit Hard This Week By Legal Battle and Market Worries

It's been an up-and-down week for Bank of America (NYSE: BAC  ) , but mostly down: Share prices for the superbank are net 2.79% in the red over the last five days, with less than two hours to go on the last day of trading. Thank general market negativity for that, but also uncertainty over what could be the bank's most crucial legal battle yet.

Waiting for Bernanke
Firstly, the world waits to see when Federal Reserve chairman Ben Bernanke and his central-bank compatriots from Europe and Japan are going to turn off the money spigots that have spurred America's nascent economic recovery, kept Europe's recessions from turning into depressions, and offered a glimmer of hope that Japan will finally emerge from its decades-long doldrums.

Secondly, B of A investors are waiting to see what will come out of a trial ending today in a New York courtroom. At issue is a challenge to a 2011 settlement between B of A, AIG (NYSE: BAC  ) , and other big investors over mortgage-backed securities issued by the superbank's problem child, Countrywide Financial.

The original settlement was for $8.5 billion, but if AIG and its co-plaintiffs win this rematch B of A could be on the hook for tens of billions more.

Foolish bottom line
Meanwhile, interest rates in the U.S. are on the rise from record lows. The yield on benchmark 10-year Treasuries has jumped more than 60 basis points in recent months, and now sits at 2.14%: still low by historic standards, but enough of a sudden jump to make everyone nervous. Mortgage-interest rates are on the rise as well, which could effect the revenue and profit of large mortgage lenders like Wells Fargo (NYSE: WFC  ) and JPMorgan Chase (NYSE: JPM  ) , as well as slowdown the country's blossoming housing recovery overall.

Of course, B of A wasn't alone in its poor showing this week: all of the Big Four banks were down to one degree or another, as were the three major market indices. When will the general market nervousness clear up? Maybe when Ben Bernanke finally begins winding down QE3. Maybe this is all just over-anticipation, and once the wind-down gets under way, everyone will relax. Or, maybe once the wind-down begins, that's when things are really going to get hairy -- as the true effects of a slowing money spigot hit the economy not just in theory, but in actuality.

As for Countrywide rematch, there's no word yet on when Judge Barbara J. Kapnick will make her decision. Unfortunately, until then, investors will remain in the decidedly uncomfortable position of not knowing if their favorite bank is facing yet another massive, crisis-related payout. As a result, the stock will likely not perform as well as it could, regardless of what the rest of the market is doing.

But always remember, Fools, to focus on the long term when it comes to investing. Obsessive ticker checking can lead to overtrading, which costs money and can hurt the performance of your portfolio. So tune out the market noise and tune into the fundamentals of the companies you're invested in: Your portfolio will thank you, even if your broker won't. 

Looking for in-depth analysis on Bank of America?
Look no further than this Motley Fool premium report -- written by top Motley Fool banking analysts Anand Chokkavelu and Matt Koppenheffer. They'll help you lift the veil on the bank's operations, and give you three reasons to buy and three reasons to sell along the way. And with included quarterly updates, this could literally be the last bit of investment research on B of A you'll ever need. For immediate access, simply click here now.