The last two days have been intriguing if nothing else.  All the S&P 500 has done since its intraday low on Tuesday is gain 6.4%.  That is a pittance, though, compared to the Russell 2000, which has soared 9.4%.

The reversal of fortune, or the exorcising of the demonic spirits we alluded to on Tuesday, has been precipitated by a burgeoning sense that European officials finally appreciate the urgent need to work in a coordinated fashion to prevent a banking crisis in Europe.

That sense was sharpened earlier today when European Commission President, Jose Manuel Barroso, indicated the commission is proposing to have member states conduct a coordinated recapitalization of the banks.  That remark helped underpin European banking stocks and European averages.  It also provided a boost to the S&P futures, which were up as many as 10 points this morning.

The gains in the futures market were almost wiped out completely, however, after the ECB dulled the senses with a decision to leave its key lending rate unchanged at 1.50%.  That news followed a short time after the Bank of England decided to keep its key lending rate unchanged at 0.50%, but to increase its asset purchase program by 75 bln GBP to 275 bln GBP.

The initial disappointment over the ECB decision has been tempered a bit by a subsequent announcement from ECB President Trichet in his press conference that the central bank will launch a new 40 bln euro covered bond program and an acknowledgment that governments should move to recapitalize banks. 

The S&P futures are now up 5 points and are trading close to fair value, suggesting a relatively flat start for the cash market. 

The latest initial claims report did not move the needle much.  Claims for the week ending October 1 rose by 6,000 to 401,000 (Briefing.com consensus 402,000), yet continuing claims fell by 52,000 to 3.700 mln (Briefing.com consensus 3.725 mln).  There were no special factors influencing the recent data.

The reaction to the claims report has been muted in part by the understanding that the results were close to expectations and that they have no bearing on tomorrow's employment report.

In other developments, retailers are reporting same-store sales for September.  By and large, the results have been decent given the reported macro constraints, yet there have been some pockets of disappointment like J.C. Penney (JCP), which issued a third quarter earnings warning, saying sales were softer than anticipated in September.

The biggest corporate headline of the day, the week, and arguably the year is that Apple (AAPL) announced the death of co-founder and Chairman Steve Jobs.  It was an announcement many had hoped they would not hear, but one they knew was likely to be a sad reality sooner rather than later when Mr. Jobs ceded his CEO duties in August.

In deserved fashion, remarks of gratitude, admiration, and respect are pouring in from around the world for a man who is widely considered to be one of the greatest innovators, and a force of cultural change, in our time.

--Patrick J. O'Hare, Briefing.com

Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.