Market Preview: Going Along for the Ride

NEW YORK (TheStreet) -- The rally in stocks may have lost some steam since last week but the commentary continues to trickle in about the Federal Reserve's bold stimulus plan being a game-changer.

Sharon Stark, chief market strategist at Sterne Agee, thinks QE3 could be the longest of the Fed's post-financial crisis asset purchase programs and she's expecting the central bank to begin buying Treasuries outright in 2013 with its extension of Operation Twist running out at the end of the year.

Her advice is for money managers to continue to be overweight in equities "with an emphasis on financials, energy and transportation" and she sees the fiscal cliff as moving "to the forefront on the risk spectrum."

Meantime, Wells Fargo wasn't moved enough by the Fed to lift its expectations for the S&P 500 to finish 2012 in the 1400-1450 range vs. Tuesday's close at 1459 but the firm also acknowledged the wisdom of a well-known market axiom.

"In the current cycle, the overall evidence has been that the Fed's quantitative easing programs have tended to generally benefit equities and some other assets like commodities," the firm said in its weekly equity commentary on Tuesday. "Thus far it has remained the case that investors should not fight the Fed when it is buying financial assets in the marketplace."

With the Fed pledging to keep battling it out even after the U.S. economy strengthens, investors sitting on the sidelines or betting against equities up until now may want to think about saving some face and going along for the ride.

As for Wednesday's scheduled news, aside from the drama of whether Apple (AAPL) can remain a member of the $700 club, Bed, Bath & Beyond (BBBY) is set to report its fiscal second-quarter results after the closing bell. The average estimate of analysts polled by Thomson Reuters is for a profit of $1.02 a share in the August-ended period on revenue of $2.54 billion.

Shares of the Union, N.J.-based home products retailer are up more than 18% so far in 2012, although the stock has pulled back since hitting a 52-week high of $75.84 on June 19. The company has topped the consensus view in the past eight quarters and the sell side remains mostly bullish with 16 of the 28 analysts covering the shares at either strong buy (11) or buy (5). The median 12-month price target sits at $75, implying potential upside of 9.7% from Tuesday's close at $68.39, which reflects a 3.4% drop on the day.

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