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Market Preview: No QE3, No Problem

Stark sees the Fed's pledge on interest rates being extended into late 2015. She believes QE3, if it happens now, would likely weigh in at between $400 billion to $600 million with the Fed purchasing an equal amount of mortgage-backed securities and Treasuries with maturities of seven years and longer. For added flexibility, she thinks the Fed could adopt an open-ended approach, announcing its bond-buying plans on a month-to-month basis while it continues to monitor economic conditions. The yield on the 10-year Treasury would likely head back down to the 1.5% level if QE3 comes to pass, Stark said, while stocks are expected to continue to do well

"Equity markets will continue to be the beneficiary of the 'risk on' trade, as was evident by the outperformance of the asset class in August," she said. "The U.S. equity market posted a total return of 2.3 percent last month, outpacing High Yield corporate which followed at a distant 1.2 percent. I expect greater volatility in the equity markets due to the subpar growth conditions in the U.S. economy and downward revisions to earnings guidance from multi-nationals."

Sterne Agee's year-end target for the S&P 500 sits at 1530, implying potential upside of 6.5% from Wednesday's close at 1437.

For his part, Sam Stovall, chief equity strategist at S&P Capital IQ, flagged some signs that QE3 might not be a done deal in commentary released late Wednesday.

"While the majority of economists project the Fed to initiate QE3, in our opinion, there are enough signals indicating that the Fed may hold off after all," Stovall wrote. "ECB President Draghi's progress in Europe, a recent rise in the yield on the 10-year Treasury note to 1.76%, and a decline in gold prices may all be signaling that nothing is assured. In addition, the reduced impact of seasonal adjustments to upcoming jobs reports may also give the Fed reason to wait."

He also doesn't see this as a big, stumbling block for stocks though.

"Even though equity prices may fall in the near term, either out of disappointment or the end of anticipation, we are maintaining our slight upward and cyclical bias," he wrote.

Meantime, it will be interesting to see if Apple (AAPL - Get Report) has any follow-through from Wednesday's late-session surge. The trading in Apple around a big product announcement is always difficult to read but it seems the verdict on the slim and trim iPhone 5 was very positive.

Expect the usual flood of positive sell-side commentary on the gadget maker on Thursday at the least and another run at yet another all-time high doesn't seem out of the question for the world's biggest company by market capitalization if the rumblings about an iPad Mini making an appearance before the end of the year prove true.

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