The Dow: Fed Watch

It's a busy week for major central banks, with each of the European Central Bank, the Bank of England, and the Bank of Japan sitting down for their regular policy and rate-setting meetings. Of these, U.S. investors will be watching the outcome of the ECB's Thursday meeting most closely, not only for any change in the interest rate, but for more details on the bank's "bazooka" -- the government bond-buying program it announced in September. The announcement alone sparked a rally in risk assets, but the devil is in the details: Unlike the Fed's quantitative easing, the ECB's program is mired in a thicket of political contingencies.

Also on Thursday, investors and commentators will be poring over the 2 p.m. EDT release of minutes of the Federal Open Market Committee's September vote, at which the Fed launched an open-ended round of bond-buying -- also known as "QE Infinity." Meanwhile, eyes and ears will be on Fed Chairman Ben Bernanke this afternoon as he answers five questions about the central bank and monetary policy at the Economic Club of Indiana, beginning at 12:30 p.m. EDT.

After a solid third-quarter performance, stocks are starting the fourth quarter off on a positive note, with the Dow (INDEX: ^DJI  ) and the S&P 500 (INDEX: ^GSPC  ) up 0.5% as of 9:54 a.m. EDT. In the short to medium term, the Fed is setting the tone for the market. And, as The Economist remarked in its Sept. 22 print edition, "It seems as if equity analysts should give up forecasting corporate profits and concentrate on decoding hints from central bankers." However, make no mistake about it: Over an appropriate time frame for equity investing (10 years and longer), earnings will determine stock returns. Once you accept that, you're ready to "Secure Your Future With 9-Rock Solid Dividend Stocks."

Fool contributor Alex Dumortier holds no position in any company mentioned. Click here to see his holdings and a short bio; you can follow him @longrunreturns. The Motley Fool has a disclosure policy.
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