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Bank of America is back to basics _ slimmed down, stripped of its swagger and no longer the biggest bank in the country. And investors, after pummeling the company for two years, finally like what they see.

The stock soared 4 percent Thursday after Bank of America reported that it made $2 billion from October through December, reversing a $1.2 billion loss from a year earlier. The stock is up 27 percent this year.

Almost none of the profit came from improvements in Bank of America’s basic businesses. In fact, it lost money in the fourth quarter in real estate and investment banking.

But the bank raised $2.9 billion by selling its stake in China Construction Bank and $2.4 billion more by selling debt and issuing common stock to replace its higher-cost preferred stock, which paid out annual dividends as high as 8 percent.

“We enter 2012 stronger and more efficient after two years of simplifying and streamlining our company,” CEO Brian Moynihan said.

The cash has strengthened Bank of America’s balance sheet, a key factor as it undergoes a Federal Reserve “stress test” and tries to meet international regulatory standards that demand banks hold more cash against risky loans.

“It would be a big step if Bank of America can prove to the Street it doesn’t need to raise additional capital,” said Shannon Stemm, a banking analyst Edward Jones, a financial advice company Edward Jones.

After the stock dropped 63 percent drop in 2010 and 2011, Bank of America is eager to start over. But it won’t be easy.

Paying $4 billion for Countrywide Financial Corp., the nation’s largest subprime mortgage lender, in 2008 seemed like a bargain but has cost Bank of America tens of billions in mortgage losses, fines and litigation.

“The biggest problem with Bank of America is that you never know what litigation expense lurks around the corner,” Stemm said.

The bank has also been forced to buy billions of dollars’ worth of mortgages from the government-sponsored mortgage financing companies Fannie Mae and Freddie Mac.

In 2011, the bank lost about $14 billion just on legal settlements tied to mortgages issued in years past. On Thursday, the bank said it put aside an additional $1.5 billion in the fourth quarter for future litigation, most of it tied to mortgages.

In addition to the legal costs, the Federal Reserve last year refused to let Bank of America increase its stock dividend, citing uncertainty about the depth of its mortgage problems Faxless payday loans.

It was the only denial issued to any of the four largest U.S. banks by the Fed, which is closely monitoring how the largest banks use their cash since the bailouts of 2008.

This year, Bank of America hasn’t asked the Fed to raise its dividend.

As the U.S. economy slowly comes back, investors are betting Bank of America is poised to capture some of that growth. But that won’t be easy, either.

Loans to people and businesses aren’t as profitable as they were before the financial crisis. Not only are interest rates at historic lows, but regulators have limited the fees banks can collect for overdrafts and late credit card payments. The government has also reduced the fees banks can ollect from stores on debit-card transactions.

Bank of America knows something about debit card fees. Last fall, it caused a public uproar when it announced it would charge customers $5 a month to use debit cards. The bank quickly backed off.

Bank of America serves about half of American households, and its results showed that housing continues remains a concern in the economy. The bank’s real estate business lost $1.5 billion after a 74 percent decline in new home loans. The bank lost some market share and closed a division that helped third-party home lenders.

But Americans seemed to be getting their financial houses in order by paying off more debt on time.

Bank of America, one of the largest credit card issuers, said customers who paid bills a month late declined for the 11th consecutive quarter. New credit card accounts also grew 53 percent, and the division posted a profit of $1 billion.

Bank of America’s investment banking business reported a loss of $433 million due to lower investment banking fees and lower sales and trading driven by the rocky stock and bond markets in the last three months of the year.

The bank’s quarterly earnings came to 15 cents per share, which was less than the 22 cents expected by analysts surveyed by FactSet, a provider of financial data. The earnings were in line with other estimates.

The bank reported fourth quarter revenue rose 11 percent to $25.1 billion from last year. For the year, the bank made $1.4 billion. It lost $2.2 billion in 2010.

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The decision by Standard & Poor’s to cut the credit ratings of a number of euro countries and to strip France of its cherished top-tier standing met with a fairly calm market response Monday as attention turned towards Greece’s difficulties in thrashing out a deal with private creditors to reduce the value of their holdings of Greek debt

Europe’s debt crisis will likely remain the focus of attention across markets all week as a number of bond auctions are due at the same time as Greece tries to clinch a debt deal with its cast of creditors.

Monday is the first opportunity for traders to respond to S&P’s move, which came late Friday.

Analysts said the downgrades had been widely expected, especially in the bond markets, so there was very little shock at S&P’s announcement to strip France of its treasured triple-A rating and to cut its view on a raft of other euro countries, including Italy. One bright spot was that Germany, Europe’s biggest economy, retained its triple-A rating and had its outlook upgraded to stable from negative.

“After weeks of prevarication and lots of rumors, Standard and Poor’s finally put markets out of their misery on Friday,” said Michael Hewson, markets analyst at CMC Markets. “The surprise is it took so long.”

As a result, the response in the markets was fairly sanguine. In early trading Monday, the Stoxx 50 index of leading European shares was flat at 2,397 while the euro was up 0.2 percent on the day at $1.2670

A bigger headache for markets at the moment is whether Greece can clinch a deal with its creditors payday loan. Last October, Greece’s partners in the eurozone sanctioned a deal whereby Greece’s creditors agree a deal to reduce the value of their Greek debt holdings so that the country’s debt burden is reduced.

The deal with private investors, known as the Private Sector Involvement, or PSI, aims to reduce Greece’s debt by euro100 billion ($126.5 billion) by swapping private creditors’ bonds for new ones with a lower value. It is a key part of a euro130 billion international bailout, the second one for Greece.

It is expected that talks on the PSI will resume this coming week. On Tuesday, representatives of Greece’s creditors _ the European Union, the European Central Bank and the International Monetary Fund _ will visit Greece for yet another round of inspections of its efforts at fiscal and structural reform and negotiations for the next tranche, the seventh, from the first bailout.

Negotiations over the second bailout will start after the PSI deal is clinched. Without a deal, Greece has been told it won’t get the next tranche of money due from its first bailout.

Without that money, Greece would find it more or less impossible to pay a big bond redemption in March and would face the prospect of defaulting on its debts, potentially triggering more mayhem in financial markets.

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The U.S. trade deficit widened more than forecast in November as American exports declined and companies stepped up imports of crude oil and automobiles.

The gap expanded 10.4 percent to $47.8 billion, the widest since June, from a $43.3 billion shortfall in October, Commerce Department figures showed today in Washington. The deficit was larger than any of the estimates in a Bloomberg News survey of 75 economists.

The U.S. import bill was driven by demand for higher-priced crude oil at the same time American companies tempered orders for consumer goods on concern household spending will cool early this year. Exports from the U.S. declined to a four-month low, depressed by a drop in shipments to Europe.

Every auto show, these days, is "all about plug-in cars and hybrids," they say. Everyone’s gawking at the cherry on top while few notice how different the ice cream underneath is.

At the 2012 North American International Auto Show in Detroit, you can see the auto industry changing — deeply, quickly and probably forever. The reasons are stricter fuel economy regulations and changing attitudes toward environmental responsibility.

Yes, those are things car companies talk about when showing off cars such as the new Ford Fusion Energi plug-in hybrid or the Acura NSX hybrid performance car concept.

But fuel economy and the environment are, just as much or maybe even more, the reasons that cars such as the Dodge Dart are equipped with fuel-efficient 4-cylinder engines, or why General Motors (, Fortune 500) unveiled the very small Buick Encore compact SUV.

They’re also why there was one notable omission from this year’s Detroit show. Not a single truck or large SUV was unveiled at any of the show stands this year. There have been auto shows in recent memory at which it seemed there were nothing but massive trucks rolling out under every drape.

Cool cars from the Detroit Auto Show

There were SUVs, of course — there always will be — such as the Buick Encore.

There was also the new Nissan Pathfinder, but even that roomy, 3-row SUV proves the point that fuel economy has become the big bogie. The Pathfinder you see on the roads today is a truck-based vehicle built to withstand real off-road use. The new one rides on car-like engineering, which will allow it to be lighter and less thirsty.

Engines themselves are getting smaller, too. Even the venerable Bentley is downsizing. The British ultra-luxury automaker unveiled the Continental GT V8 at the show.

Under the hood of this car is a relatively modest twin-turbocharged 4.0-liter V8 which, Bentley estimates, will quaff 40% less premium than the 6.0-liter V12 in the less stingy version of the car. Even with the V8, performance will still be "exhilarating," Bentley promises.

In more pedestrian cars, the "bigger engine" option is pretty much out. Today, the Ford Fusion is available with a V6 engine. The new one will not be. Only various 4-cylinder engines will be offered. The Dodge Dart, as well, will be available only with 4-cylinder engines.

Even performance is being subtly redefined. It used to be that performance was measured in one, single, easily stated number: horsepower. In auto shows past, carmakers would compete to see who could unveil the car with most eye-popping horsepower number.

And that’s not entirely over. Shelby American Inc. was on hand with its display of modified Ford (, Fortune 500) Mustangs with horsepower outputs stretching all the way to a gut-crunching 800.

The "new performance" could be found at the Subaru and Toyota () stands, where the identical Subaru BRZ and Scion FRS were on display. These cars put out a relatively slight 200 horsepower out of 2.0-liter flat-four engines. That’s an impressive figure, given the size of the engine and the fact that it doesn’t have a power-boosting turbocharger or supercharger.

But these cars aren’t about zero-to-60 times, Scion and Subaru representatives say. They’re about driving fun. Engineers put the engine as low as possible in the car to create the lowest possible center of gravity, the idea being to optimize cornering while still going quick enough to produce a healthy grin.

This new trend in less showy fuel economy was perhaps best exhibited in the show’s opening moment. A jury of automotive journalists awarded the North American Car and Truck of the Year Awards to the Hyundai Elantra and the Land Rover Range Rover Evoque.

The Elantra, a compact car, gets 40 miles a gallon without sacrificing driving fun. The Range Rover Evoque uses a turbocharged 4-cylinder engine to provide enjoyable driving performance while still getting an impressive — in this context — 22 miles per gallon in combined city and highway driving.

Of course, there are still those plug-in cars. But with standard, run-of-the-mill gasoline-powered cars pushing the fuel economy bar ever higher, they seem likely to remain car show sideshows for a few years longer. 

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Businesses increased their stockpiles in November to meet rising consumer demand, a gain that likely boosted economic growth in the final months of last year.

Inventories rose 0.3 percent in November, the Commerce Department said Thursday. That followed October’s 0.8 percent gain. Sales increased 0.3 percent after a 0.6 percent October increase.

Companies are building up their stockpiles again after cutting them over the summer amid fears of another recession. The increase is a positive sign for growth because it means many businesses are filling their shelves in anticipating of higher consumer spending.

Inventories rose in November to a seasonally adjusted $1.55 trillion. That was 17.7 percent above the low hit in the recession year of 2009.

This week, the Federal Reserve issued a report saying the final six weeks of 2011 were among the economy’s best last year. The report pointed to higher holiday and auto sales, along with increased travel.

The job market has brightened, too. Employers added 200,000 jobs in December. And the unemployment rate fell to 8 bad credit personal loan lenders.5 percent, the lowest in nearly three years.

Many analysts predict that economic growth rose to an annual rate of roughly 3 percent in the final three months of 2011. That would be an improvement from the summer, when the annual rate was just 1.8 percent. And it’s much better than the 0.9 percent growth rate in the first six months of 2011.

Many businesses reduced their inventory restocking in the summer after consumer spending slowed last spring in the face of higher food and gas prices. The slowdown, along with supply disruptions caused by March’s earthquake in Japan, weakened U.S. manufacturing and contributed to worries of another recession.

Stockpiles at the wholesale level account for about 27 percent of total business inventories. Stockpiles held by retailers make up about one-third of the total and manufacturing inventories represent about 41 percent of the total.

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Stock markets shrugged off signs of a slowing Chinese economy on Tuesday, as investors hoped for strong corporate earnings from the U.S. and looked to a new round of talks in Berlin for progress in solving Europe’s debt crisis.

The U.S. economy has shown new signs of strength recently, and investors are hoping that will boost corporate earnings results due to be announced in coming weeks. In particular, signs that the U.S. labor market is improving has raised the possibility of a recovery in American consumer spending, one of the main motors of global economic growth.

Britain’s FTSE 100 index of leading shares rose 1.0 percent to 5,668.89 and Germany’s DAX rose 2.4 percent to 6,158. France’s CAC-40 rose 2.1 percent to 3,194, while indices in Spain, Italy, Switzerland and elsewhere across Europe also recorded gains betwen 1 and 2 percent.

Ahead of the opening bell, Wall Street appeared set for a higher opening as well. Dow Jones industrial futures rose 0.5 percent to 12,402 and S&P 500 futures gained 0.6 percent to 1,283.10.

Moods were tempered by relatively gloomy indicators out of Europe.

The European Central Bank said Tuesday that the amount of overnight deposits that the region’s banks held with it rose to euro481.93 billion ($613 billion) on Monday, breaking the record euro463.56 billion set only a day before.

The high deposits mean banks are keeping spare cash in a safe place even though they earn low interest. They also reflect large amounts of cash put into the banking system from ECB emergency loans of euro489 billion taken up by more than 500 banks in late December.

Dutch electronics giant Royal Philips Electronics NV kicked of corporate Europe’s earnings season by warning that its fourth quarter profits were worse than expected due to a weak European market that made it difficult to charge customers as much as it wanted to for light bulbs.

“Our expected fourth quarter financial results have been affected by the weakness in Europe, which has impacted our health care business, as well as pricing in our consumer lighting business,” said Chief Executive Frans van Houten in a statement.

Philips shares fell 6 percent to euro14.715 in early trading in Amsterdam.

On the day that international debt inspectors were returning to Athens, Greece successfully raised euro1.625 billion ($2.07 billion) in the sale of 26-week treasury bills, at a marginally lower interest rate than a similar auction last month.

Debt-crippled Greece relies on international rescue loans to keep solvent. Although unable to issue long-term debt due to incredibly high borrowing costs, it maintains a market presence through regular treasury bill auctions business card templates.

Greece’s situation will be discusses at an “informal” meeting between Germany’s Chancellor Angela Merkel and International Monetary Fund boss Christine Lagarde in Berlin Tuesday evening.

Ahead of that meeting, Fitch Ratings said a number of euro countries, including Italy, may see their credit ratings downgraded by one or two notches by the end of this month as they struggle to cope with the debt crisis.

Fitch’s head of sovereign ratings David Riley says Tuesday the agency will give its verdict on several countries by the end of January. Fitch currently has Italy, Spain, Belgium, Ireland, Slovenia and Cyprus on so-called “ratings watch negative.”

Much interest in the markets centers on Italy, which Riley says is the “front line” of Europe’s debt crisis.

Overnight markets in Asia were marginally higher thanks to improving economic data out of the U.S., said Cameron Peacock of IG Markets in Melbourne.

The optimism was tempered by news that China’s import growth decelerated sharply in December in a new sign the world’s second-largest economy is slowing.

The customs agency said December imports rose 11.8 percent over a year ago, down from November’s 22.1 percent gain. Exports rose 13.4 percent, down only marginally from the previous month’s rate.

The country’s politically sensitive global trade surplus widened to $16.5 billion.

Weaker Chinese demand for imports reflects a slowdown in rapid domestic economic growth after Beijing tightened lending and investment curbs to prevent overheating. A slump in global demand for Chinese goods has prompted the government to reverse course and promise measures to shore up growth.

Japan’s Nikkei 225 index, reopening after a three-day holiday weekend, added 0.4 percent to close at 8,422.26. Hong Kong’s Hang Seng index rose 0.7 percent to 19,004.28 while South Korea’s Kospi jumped 1.5 percent to 1,853.22. Australia’s S&P ASX 200 rose 1.1 percent at 4,152.20. Benchmarks in Singapore, Taiwan, and Indonesia also posted gains.

Benchmark crude for February delivery rose $1.46 to $102.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 25 cents to settle at $101.31 in New York on Monday.

In currency trading, the euro rose to $1.2799 from $1.2762 late Monday in New York. The dollar fell to 76.85 yen from 76.89 yen.

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Federal Reserve Bank of St. Louis President James Bullard said the Fed probably won

Delivery companies such as FedEx Corp. (FDX) and United Parcel Service Inc. (UPS) added 42,200 jobs to payrolls in December, about a fifth of the total for all employers last month. History indicates the gain will be followed by a similar-sized loss in January.

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