Shares in Commonwealth Bank of Australia (ASX: CBA) have skyrocketed 95c or 1.2% today, ending the stock's six-day losing streak. The bank has even outperformed the S&P/ASX 200 Index's (Index: ^AXJO) (ASX: XJO) impressive 1.1% gain for the day so far.
Here are three reasons why the stock might be regaining the market's confidence today…
1. The Aussie market is highly leveraged to the performance of the US markets. Overnight, the Dow Jones gained 0.58% and the Nasdaq rose 0.59% after the Federal Reserve reiterated its confidence that the US recovery is still largely on track and that US interest rates will remain low for a "considerable time". This has been a strong tailwind for most Aussie stocks today!
2. Speaking of interest rates, the Reserve Bank of Australia minutes, which were released on Tuesday, showed that Aussie interest rates would also remain low for some time yet. This is great news for Australia's banks as it will likely see bad debt charges remain low and lending activity continue to grow strongly.
3. The stock has fallen every day since hitting an all-time high of $82.685 a little over a week ago, in what was likely a period of profit-taking. With a burst of additional confidence injected into the global economy, it seems that upwards momentum may have been rediscovered.
CBA isn't the only major bank springing today. Australia and New Zealand Banking Group (ASX: ANZ) has also jumped nearly 1%, while Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) have risen 1.4% and 1.3% respectively.
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Although there could be gains to be made in the short-term, the stock is wildly overpriced and is by no means a good long-term bet. While amazing 'Buy' opportunities have become harder to come by, there are still plenty to be found, if you know where to look…
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