Today's Outlook - Ireland Downgrade, Huge ADP Emp Miss, and POMO

Yesterday the market surged higher as the Fed purchased $5.19B of 2016-2020 Treasuries and the primary dealers drove BIDU, NFLX, and AMZN up 5% or more. The dollar sank to an 8-month low against the euro as market participants continue to believe that the Fed will launch a $1 Trillion asset purchased program (QE2) on November 3rd, on top of the $400B or so of expected POMO over 2011. Also helping the market was the ISM Services Index which came in at 53.2 vs. the 51.8 that had been expected. Gold was up 2% to a new all-time high of $1340.60/ounce, and oil reached 82.48. Lastly of major note was Japan announcing plans for a 5 trillion yen fund to purchase bonds and ABS securities. So QE announcement out of Japan, and as we are not going to lose the race to hyperinflationary-causing currency debasement, it looks all the more likely that we will see QE2 sometime over the next few months.

The Dow finished at a fresh 4-month high at 10,944 up 193.45 points. The S&P closed at 1,160.75, and the Nasdaq at 2,399.

Futures are slightly lower this morning on ADP Employment Change data which came in at -39K vs. +10K prior and +20K forecast. Ouch. We'd probably be looking a lot lower, but we will have another batch of POMO at 7:15 a.m. PST. Judging by its effects yesterday, and also given that it is the last installment of POMO for a number of days, its likely to be as robust as yesterday's.

Ireland was downgraded to A+ from AA- and put on negative outlook by Fitch. "The downgrade of Ireland reflects the exceptional and greater-than expected fiscal cost associated with the government's recapitalization of the Irish banks, especially Anglo Irish Bank." Fitch said this morning.

The FT reports this morning that IMF chief Dominique Strauss-Kahn has said that governments are risking a currency war if they try to manipulate exchange rates to solve domestic problems.

The IMF also has a report out this morning lowering its US growth forecast to 2.6% and 2.7% for 2010 and 2011, respectively. These revisions are -0.7% and -0.6%. IMF Chief Economist Olivier Blanchard told a press conference, "But it is an unbalanced recovery, sluggish in advanced countries, much stronger in emerging and developing countries."

Dow +100 today? Why not?