Welcome to today’s Morning Coffee Break – The Federal Reserve decisively stepped off the sidelines with a stronger than expected new round of unlimited quantitative easing (QE3) sending U.S. markets rallying. Market participants are clearly satisfied with the FMOC’s move as U.S. futures are indicating an extension of yesterday’s rally.Yesterday’s close for the Dow Jones and S&P 500 put the indexes at the highest level since December 2007 and the NASDAQ closed at its highest level since November 15, 2000. 

As market participants rethink and strategize the day after QE3 a flurry of economic data could help set the tone with August Retail Sales and Consumer Price Index (CPI) reports are released at 8:30 a.m. ET.

Analysts are looking for an of 0.9% increase in retail sales month over month and 0.6% higher in consumer prices with the increase mainly due to energy and food.  Core CPI is expected to move higher by 0.2% month over month.

Global Markets

Global markets road the FMOC announcement of QE3 higher moving sending the entire Asian region higher during overnight trading with South Korean gaining an extra boost with a credit rating upgrade from Standard and Poor rating agency.

Emerging Markets

The Central Bank of Chile held key interest rates at 5% for the 8^th straight monetary decision. The decision was in line with analysts widely excepted opinion as the central bank balances slowing global growth coupled with strong domestic demand.

In the statement released by Central Bank of Chile it indicated "there is still uncertainty" referring to health of European economies, "and a resurgence of tensions in coming months cannot be ruled out."

The statement also commented that inflation remain around target rates.

Market participants may want to keep an eye on the emerging market’s giant – China – the Shanghai Stock Index moved the least on the QE3 announcement as it was the only index in the region that fail to move higher than a full percentage point.

Companies to Watch

Apple (AAPL , quote) and its downstream partners such as and Verizon Wireless  as consumers begin to pre-order their iPhone 5 from Verizon Wireless (VZ, quite), AT&T (T , quote) and Sprint (S, quote) today. Reports from Verizon, Sprint and Apple all indicate pre-ordering sales of the iPhone is going smoothly.

Futures and Commodities Corner

Crude Oil

The Organization of Petroleum Exporting Countries commonly known as OPEC announced its forecast for the remaining of 2012’s global oil demand will be unchanged at rate of 0.9 million barrels of crude oil per day.  OPEC indicated there could be downside risk in economic slowdown spilling over to non-OPEC counties.  OPEC’s statement went on to say it was not changing its 2013 run rate of 0.8 million crude oil barrels per day.

WTI Crude Oil is continuing its rally in early electronic trading moving above that physiological level of $100.00 up $1.96 or 1.95% from the previous session. It’s the first time WTI Crude Oil has moved above $100 since May 4.  Price action has crude futures now well above the 150 and 200 day moving averages and has broken above the Fibonacci 27% extension level suggest price on its way to the 61.8% extension at $103.70 level.

Equity only readers can gain exposure to WTI Crude Oil through the United States Oil Fund (USO, quote) ETF that seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The USO will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.

Gold

Gold futures moved higher by 2.1% on the announcement of U.S. Federal Reserve’s initiation of round 3 of quantitative (QE3) expanding its holdings of long term assets in the sum of 40 billion USD per month with no limit or duration of the program. This triggered a rally in both gold and silver sending gold to just shy of resistance ($1,796.10) set back in February’s 2012.

Equity only readers gain exposure to the gold through the SPDR Gold Shares Trust (GLD, quote) ETF that seeks to replicate the performance, net of expenses, of the price of gold bullion. The GLD trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets.

The Morning Coffee Break Bottom Line: 

Markets are poised to continue the QE3 rally at the open as risk on is now the name of the game. Look for names that will benefit from QE3 such as Wells Fargo & Co (WFC, quote) and Bank of America (BAC, quote) as the Federal Reserve buys mortgage back securities which will have direct effect on banks holding those mortgages.