Stock Futures Rally on Fed's QE Announcement

NEW YORK (TheStreet) -- U.S. stock futures were pushing higher Friday, pointing to an extended rally on Wall Street despite some tepid economic data, after the Federal Reserve announced Thursday aggressive monetary policy action including an open-ended bond-buying program and after the central bank said that a highly accommodative monetary policy should remain in place until it sees real strength in the economic recovery.

Futures for the Dow Jones Industrial Average were up 41 points, or 27.14 points above fair value, at 13,486. Futures for the S&P 500 were up more than 4 points, or 1.46 points above fair value, at 1455. Futures for the Nasdaq were up 10.5 points, or 7.55 points above fair value, at 2832.

"The stock market has already reacted to the FOMC announcement ... I expect, however, that the stock market response to QE3 will continue to be positive while that program is in place," said Brian Gendreau, market strategist at Cetera Financial Group, who notes that the S&P 500 rose 36.4% during QE1 and 10.2% during QE2.

"Other matters, such as the impending fiscal cliff and Europe's continuing troubles could of course work in the other direction, but the additional liquidity from QE3 will be viewed as a source of support for the market by investors, in my view," he said.

Gendreau, however, said he expects that the third round of stimulus will have a diminishing impact on the market. Long-term interest rates are already at such low levels that their going down a further few basis points would unlikely have as big of an impact on household or corporate borrowing and investing decisions, he said.

Quincy Krosby, market strategist with Prudential Financial, cautioned that while investors are cheering the Fed's commitment to continued stimulus, economic and corporate fundamentals may soon make their way back into the headlines.

"Still, with the focus on mortgages, housing and housing related stocks should continue to do well," said Krosby .

"Banks, particularly those sensitive to the housing markets, are also beneficiaries of the Fed's move. "

Krosby added that high yield bonds, similarly, will benefit from the Fed's stance on keeping rates low for a longer period of time.