U.S. stocks poised to move higher on QE3 tailwind

U.S. stocks poised to move higher on QE3 tailwind
SAN FRANCISCO (MarketWatch) — Four years after the financial crisis claimed Wall Street bank Lehman Brothers, there will be few investors dwelling on bygones next week as U.S. stocks are poised to test higher levels in the wake of the Federal Reserve’s decision to pump more funds into the economy.

But the breadth and the intensity of the gains will hinge on the quality of latest economic data as well as developments in Europe, while the market’s upside potential may also be limited by profit-taking, strategists said.

On Thursday, the Federal Reserve said it would buy $40 billion worth of mortgage-backed securities per month as part of a stimulus plan colloquially known as QE3, or a third round of quantitative easing.
The announcement triggered a rally in the stock market, with the S&P 500 Index (SNC:SPX) and the Dow Jones Industrial Average (DJI JIA) both closing at 52-week highs on Friday.

“Clearly there is some continued momentum following the Fed’s announcement,” said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. “That said, various sentiment and technical measures show the market to be a little stretched in the near term, so I wouldn’t be surprised to see a little profit-taking at some point soon.”

Next week is shaping up to be relatively light on economic indicators, but some housing-related data will provide a better picture on how the real-estate market is faring.
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