Enjoy The Sucker's Rally, Says Merrill's Rosenberg

(Clusterstock.com) David Rosenberg:

[The Fed's purchase of $300 billion of Treasuries] is equivalent to nearly 20% of this year’s bond borrowing requirement. As a stand-alone event we think this is worth 75-100 basis points of interest rate reduction (so today’s post-meeting 50bp rally takes us between one-quarter and half-way there). We also believe that the risk to this program size is clearly to the upside...

Fed’s announcement less bullish for equities, in our view.
But the equity market, which had already been enjoying a classic short-covering rally accentuated by quarter-end pressures, also reacted very positively to the Fed’s announcement today and at one point the S&P 500 looked set to break above the 800 threshold for the first time since mid-February. We are of the view that what occurred this afternoon was less bullish for the equity market than meets the eye. Here’s why:


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