Fourth quarter GDP ended on a uptrend, coming in at 3.1%. The state of the economy was healthy and it looked like growth would continue to match or exceed Q4. Based on that scenario, Bank of America (BAC) analyst Ethan Harris, forecast first-quarter 2011 GDP to come in at 3.3%.

But in the few short months of 2011, the world is getting turned upside down. The conflict in Libya has cut OPEC oil production and sent oil prices skyrocketing. In turn, the price of gasoline is nearing $4.00 per gallon. And food processors are raising prices due to higher raw commodity prices. These two factors have put a dent in the household budget.

Bank of America (BAC) is a pretty big player in its industry; it's got brand equity -- everyone has heard of it. How is its stock looking these days?

At the time of writing, shares could be had for $13.44. The 52-week low for the company is $10.91; the 52-week high is $19.86. That's a tight range, and as one might imagine, this company has been a vehicle for traders trying to ride whatever volatility is available at any given time.

Let's go back to the financial crisis and the practices that brought this country to its knees. Banks developed a fancy scheme whereby they absolved themselves of all risk from the loans they made. They simply wrapped them up in a bundle and sold them to someone else. What they were doing is essentially packaging and reselling "junk."

When the news of how bad things were became known, the markets froze and collapsed. No one knew who had which securities, and if they did, they didn't know their true value.

Analyst Upgrades

• Red Hat (RHT) to outperform from neutral at RW Baird.
• Cogdell Spencer (CSA) to buy from hold at Citigroup.
• Micron (MU) to neutral from reduce at Nomura.
• El Paso Electric (EE) to buy from hold at Jefferies.
• MICROS Systems (MCRS) and Harmony Gold (HMY) to outperform from sector perform at RBC Capital.
• Meridian Bioscience (VIVO) to buy from hold at Canaccord.
• Verso Paper (VRS) to outperform from neutral at Credit Suisse.
• Sony (SNE) to buy from hold at Deutsche Bank.
• Noble Corp. (NE) and Baker Hughes (BHI) to buy from neutral at UBS.
• Tyson Foods (TSN) and Smithfield Foods (SFD) to buy from hold at BB&T.

Charles Schwab (SCHW) has announced its decision to acquire optionsXpress (OXPS) in a friendly all-stock deal. This deal will help Schwab compete with other firms like E-Trade (ETFC), Ameritrade (AMTD), and Bank of America (BAC), which all have large online brokerage services and are vying to provide investors with the best tools and services.

The deal, which is expected to close by the third quarter of 2011, will cost Schwab $1 billion, and the company will issue 60 million new shares to swap each outstanding share of optionsXpress with 1.02 of its own shares. Our $19.74 price estimate for Charles Schwab is at a premium of almost 12% to its current market value.

Just when we thought the banking crisis was finished, we get another jolt. The U.S. Federal Reserve denied Bank of American (BAC) permission to raise its dividend.

If you recall, Bank of America is still struggling to absorb toxic assets it acquired with its purchase of Countrywide Mortgage. It has been on a slow climb back to fiscal health. At the end of 2010 the company was still bleeding, with a net loss of $1.2 billion.

Banks are back in the news -- in a good way. Speculation is that mergers and acquisitions will be picking up, so are profits. Some are looking to raise their dividend and/or buy back more shares. Bank of America (BAC) is one of them.

The CEO, Brian Moynihan, announced that B of A wasn't looking to buy other banks. Instead, the bank would be focused on returning more capital to shareholders in the form of a regular dividend (now 4 cents a year), share buybacks and special cash dividends. The reason: he feels the bank will earn between $35 billion and $40 billion a year (yes, billion ... a year) in pretax earnings when the business normalizes. (But there's the catch: when does business get to normal?)

This is the fourth update to my ranting eight months ago that acquiring six of the most hated, and most highly traded stocks with constant negative headlines would outperform the overall market. The theory has born fruit as the toxic stocks are ahead and the difference is increasing over time.

"Even when the market is up a lot, you can always find some good stocks that have been left behind but could be on the verge of a rebound," says George Putnam.

The editor of The Turnaround Letter explains, "That's where we suggest you focus your efforts right now. These eight stocks all have strong business franchises and have all significantly lagged the market over the last two years.

"In fact, several of them are still trading near or even below where they were in early 2009. Here, we look at Bank of America (BAC), Best Buy (BBY), Campbell Soup (CPB), Cisco Systems (CSCO), Microsoft (MSFT) and Sprint Nextel (S).

When it comes to hard-disk drives, Western Digital (WDC) is the largest publicly traded operator in the U.S. And with its recent deal, it will get much larger. That is, the company has agreed to pay $4.3 billion for the data storage business of Hitachi.

Based on the stock move for Western Digital, investors love the transaction. In early Monday trading, the shares were up a sizzling 17.33% to $35.21.

iShares Barclay 20+ Year Treasury ETF (TLT) March put option implied volatility is at 15, April is at 17, June is at 19, September is at 20, compared to its 26-week average of 16, according to Track Data, suggesting larger outer month price movement.

Bank of America (BAC) overall option implied volatility of 35 is near its 26-week average of 39, according to Track Data, suggesting decreasing price movement into its March 8 analyst day.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

Bank of America (BAC), the largest bank in the U.S. based on the level of deposits, is testing new fee structure for its checking account service, which used to be free. The new pilot program for the customers in Arizona, Georgia and Massachusetts allow the customers to apply for various account types with a monthly fees ranging from $6 to $25. The bank plans to expand the program nationally later this year. Other banks such as JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC) have introduced new fees on the checking account service after the Dodd-Frank financial reform bill restricted banks from charging merchants processing fees on debit card transactions.

"Compelling valuations and improving fundamentals mean that 2011 could be a strong year for shares of the biggest U.S. banks," suggests Elliott Gue.

The editor of Personal Finance explains, "To benefit from this outlook, Bank of America (BAC) is a new addition to the model Growth Portfolio.

"Bank of America suffered mightily during the financial crisis of 2007-09. Not only were the bank's legacy loan portfolios hit hard by delinquencies and charge-offs, but the company also assumed additional liabilities and credit risk when it acquired Countrywide Financial and Merrill Lynch.