NEW YORK ( TheStreet) -- Will Ben Bernanke throw Wall Street a curve ball tomorrow? Stocks have surged since early June in anticipation that the Federal Reserve will come across with another round of quantitative easing on Thursday afternoon when it wraps up its September policy meeting but it's worth remembering the central bank's next policy confab is waiting a little more than a month away. Yes, the August jobs report was a bummer but it wasn't exactly a disaster with a 96,000 increase in non-farm payrolls. The Fed's mantra has been that it's ready to step in with "additional accommodation as needed" to help the recovery but what's the determining factor confirming that time is now? Why not keep twisting a bit longer, and save QE3 for the Oct. 23-24 meeting? Make it a treat before Halloween (and coincidentally closer to the presidential election on Nov. 6)! The contrarian in Bernanke has to be bristling a bit at the prospect of moving in lock-step with investor expectations. Just food for thought. The much-greater likelihood is that QE3 will arrive right on time. That's also the view Sharon Lee Stark, chief market strategist at Sterne Agee; although she left the door open a tiny bit for a September surprise from the FOMC. "Persistent unemployment and slowing manufacturing production, coupled with the lack of action on fiscal programs, may force the Fed's hand this week and complete the second leg of a coordinated strike by world central bankers," she wrote, adding later: "I expect the Fed will take action this week to both commit to a extended period of zero to 25 bps short-term rates and long maturity bond purchases to anchor long term rates to ensure availability of affordable credit to small businesses and corporations in the capital markets." She continued: "The Fed could opt to take these actions in two steps, in which case, QE3 is announced at the October FOMC meeting. I would not expect any changes to my outlook, and near-term market reaction may be a brief sell off in the markets and then recovery as investors position for what is expected from the next meeting." In other words: 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) 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.
As for Thursday's scheduled news, Pier 1 Imports ( PIR) is slated to report its second-quarter results before the opening bell. The average estimate of analysts polled by Thomson Reuters is for earnings of 19 cents a share in the three months ended in August on revenue of $367.2 million. Shares of the specialty retailer are up more than 60% in the past year, hitting a 52-week high of $19.62 on Monday, and the sell side is bullish ahead of the report with 8 of the 12 analysts covering the stock at either strong buy (7) or buy (1) and the median 12-month price target at $21. Thursday's economic calendar includes weekly initial and continuing jobless claims at 8:30 a.m. ET; the producer price index for August at 8:30 a.m. ET; and the Treasury budget for August at 2 p.m. ET. -- Written by Michael Baron in New York. >To contact the writer of this article, click here: Michael Baron.