European and American plans for a bond-buying bonanza has turned September, usually a dismal month for stock markets, into happy days again for investors. The S&P 500 and S&P/TSX index are both up close to 5 per cent since August came to a close.
But will the rally stick? Today's premarket activity suggests some of the Ben Bernanke buzz may be starting to wear off, with U.S. futures slightly in the red.
After all, there's an irony in last week's celebratory reaction to the Fed unleashing the third round of quantitative easing. Mr. Bernanke's actions signalled that he felt the U.S. economy was in such miserable shape that he had to make this latest stimulus even more potent by not setting any time limits on it. He even went a step further by pledging to extend the already unprecedented near-zero interest rate policy clear into 2015.
History suggests the party might be able to go on for a while. In the month following a QE announcement, the S&P 500 has gained an average of 5 per cent. But stock markets reversed course thereafter once it became clear economies didn't get the boost that was hoped for, and as fiscal debt concerns once again took centre stage.
The open-ended nature of the Fed's QE3 could keep the market better supported this time around. But some certainly still see storm clouds forming. The relatively small ratings agency Egan-Jones, for instance, on Friday afternoon downgraded its credit rating for the U.S., citing the potential for QE3 to drive up inflation and weaken the dollar. "The increased cost of commodities will pressure profitability of businesses, and increase the costs of consumers, thereby reducing consumer purchasing power," it warned.
Today, caution is in the wind, and with little key economic data or other scheduled events, profit takers are making a return.
Now, here's the rundown of what else you need to know as the investing day gets underway.
MARKETS:
Equities:
Futures: Dow -0.02 per cent, S&P 500 -0.2 per cent, Nasdaq -0.2 per cent
Hong Kong's Hang Seng index +0.14 per cent
Shanghai Shenzhen CSI 300 -2.16 per cent
Japan's Nikkei +0.33 per cent
London's FTSE 100 -0.30 per cent
France's CAC 40 -0.52 per cent
Germany's DAX index -0.18 per cent
Commodities:
WTI (Nymex Oct) -0.05 per cent at $98.95 (U.S.) a barrel
Gold (Comex Dec) +0.05 per cent at $1,773.50 (U.S.) an ounce
Copper (Comex Dec) -0.65 per cent at $3.81 (U.S.) a pound
Currencies:
Canadian dollar down 0.0007, or 0.07 per cent, at 1.0290 (U.S.)
STOCKS AND ECONOMIC INDICATORS TO WATCH:
Rona Inc. shares are likely to come under heavy selling pressure after the Lowe's home improvement chain said it is retreating from its controversial plan to buy the Canadian retailer, citing its inability to come up with a friendly deal.
Apple says preorders for its iPhone 5 are more than double the record held by the iPhone 4S, topping 2 million units in the first 24 hours. Apple shares are up 0.5 per cent in the premarket.
Canadian Real Estate Association expected to release home price index. It's forecast to show a gain of 4 per cent from a year ago.
THIS MORNING'S TOP READS ON THE WEB:
The behavior of some key market segments helps confirm the market's rally is more than just a one-week wonder.
Four ways the Fed's third round of quantitative easing could go wrong.
What if the Fed is underestimating the potential for inflation? One investment pro thinks the miscalculation could lead to $10,000 gold.
In one of the first market forecasts for 2013, Bank of America Merrill Lynch's chief U.S. equity strategist sees stocks having a bumpy ride next year before ending with the S&P 500 up 10 per cent to an all-time high.
10 stocks likely to be resilient once the Fed's asset-buying euphoria fades.
What makes a good trader great? In a word - conviction.
One of the greatest fund managers you've probably never heard of offers his key investing advice.
Why Silicon Valley and Wall Street see Facebook so differently.
ETFs that will profit from rising U.S. home prices.
Why the launch last week of the iShares MSCI Frontier 100 Index Fund will be a game-changer in the ETF world.
Darcy Keith