Fed's taper surprise puts jumpy market in limbo

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What's next for stocks? Let's look at what we have: 1) a Federal Reserve hell-bent on getting any kind of growth it can, at almost any price, 2) a stable Europe, and 3) both China and Japan improving on the data front, yet still tenuous.

In other words: we're not going downhill, but this is hardly a synchronous (or brisk) global recovery.

David Tepper, in a classic bit of understatement, said all this "should lead to a pretty favorable environment for the markets."

Yes, but it is very fragile. And that's what the Fed appears most worried about: it's why many think there will be a more gradual tapering than was expected.

Fed chief Ben Bernanke has put himself in a difficult position. It will be difficult to taper before Christmas. I've even heard arguments that the Fed wouldn't taper in Christmas because there will be a new Fed chairman coming in. Yet given what happened yesterday, I don't think the Fed will let that stop them.

What is a problem is the bond market. Bernanke said he was concerned about tapering because of the rise in yields. The Fed will have to face down the barrel of the bond market when it wants to taper.

What can we expect next?

1) some fund inflows returning to emerging markets. One things' for sure: Bernanke threw a temporary lifeline to emerging markets. For the moment, they will likely be free of the currency devaluations that have plagued them.

But this does not change of the fundamental problems with emerging markets: the lack of infrastructure, the lack of economic reforms. This is going to give them breathing room to make necessary changes. Until they do, I expect some "knee-jerk" inflows, but no avalanche of new money.

One last point: emerging markets were already coming off their June lows:

India 2.5-Year High

Russia 6-Month High

Brazil 3.5-Month High

Turkey 3.5-Month High

Indonesia 2.5-Month High

Thailand 2-Month High

Philippines 1-Month High

Malaysia 1-Month High

2) interest-rate sensitive sectors (housing, utilities, telecom, REITS) should once again outperform.

One final point: the Fed action may have made this week's quadruple witching (the quarterly expiration of individual stock and index futures and options) fairly irrelevant. Options traders tell me that prices yesterday moved so far that much of the open interest in existing strikes is much lower than current levels. So there's less relevant options for traders to hedge.

For example, the largest open interest in near-by strikes in the SPX index are at 1675, and then 1700. But we are near 1730 in the S&P 500. There are far fewer options anywhere near 1725.

By CNBC's Bob Pisani