Shares of Commonwealth Bank of Australia (ASX: CBA) have led the S&P/ASX 200 (INDEXASX: XJO) to one of its strongest performances this year with the stock up $1.33 or 1.8%. Although they are still a long way off their July high at just $76.35, today's rally provides shareholders with a much-needed breath of fresh air.
Here are three reasons why the stock might be trending higher today…
1) Yields. Wall Street experienced its strongest day since December 2013 overnight after the US Federal Reserve reiterated that it does not plan to raise interest rates until such time as the economy can handle the increase. As a result, foreign investors will once again be attracted to the generous dividend yields offered by Australia's big four banks. National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) also rose strongly as a result.
2) Cheap. Although many investors still perceive the big four as being overpriced, others are viewing the recent setback as an opportunity to stock up. While there is certainly potential for them to rise in price in the near term, I still believe they are too pricey for long-term investors.
3) Analyst upgrade. It's also possible that an upgraded recommendation from Bell Potter last week could be encouraging investors. Given the market's downwards trend, investors may have been a little hesitant to follow Bell Potter's recommendation immediately but with the stock now trading even lower, they may see this as a magnificent opportunity.
While I would suggest investors should still give the banks a wide berth despite their recent setbacks, there is another stock I urge you to consider buying today…
