Because of an anticipated new round of quantitative easing, the dollar has recently been down significantly against the euro and yen and the prices of commodities have been soaring. (As of Friday, the CRB is up almost 18% since its July 1 low.) If some form of QE2 does occur, many folks think that a chunk of the money it creates will also find its way into stock prices. However, because QE2 may wind up crushing corporate profits, its quite possible that its effect will be just the opposite.
While QE2 may serve to further lower long term interest rates, those rates are already so astoundingly low that it's highly unlikely that there is anyone out there who will need and qualify for a loan at these slightly lower rates who didn't need or qualify for one at current rates. Thus, many folks are saying (and I agree with them) that any fresh money created by QE2 is likely to find its way onto various trading desks and thus into various asset prices.
The problem this creates for American corporations is that this surge in commodity prices is likely to significantly raise their input prices while doing nothing to create additional demand (or pricing power) for their finished products, and thus their profit margins (which are currently unusually high) are likely to get crushed, with their stock prices following (which is exactly what happened during much of the 1970s). So, if QE2 does occur, watch out for some significant earnings warnings and considerably lower stock prices.
Disclosure: Author is short SPY, long SDS