We said earlier in the week that headline hysteria and heightened volatility would be market mainstays.  Oh, how we wish we were wrong.

The Greek prime minister's call for a referen-dumb on the EU bailout plan has provided a recurring source of volatility and today is no different.

Volatility of course can cut both ways.  Saying things are volatile doesn't mean they are always bad.  In this instance, the volatility favors the bulls.

That wasn't always the case in the last 12 hours or so.  S&P futures traded sharply lower in overnight action following yesterday's late-breaking headline (just before the close) that the 8 bln euro tranche of bailout funds for Greece would be withheld until there was clarity on the referen-dumb.

Things turned on a dime around 4:00 a.m. ET, however, on reports the referen-dumb might be canceled.  For good measure, that report followed reports that there was growing dissension in Papandreou's party, so much so that his own party members were reportedly calling for Papandreou's resignation.    He is reportedly set to offer it, so there should soon be many reports on what Papandreou's resignation reportedly means for Greek politics and the bailout plan.

Let's just say, then, that Greece is on report.  Stay tuned.

At the moment, the market is reportedly taking a favorable view of the latest headlines.  The S&P futures, which traded below 1215 overnight, are now up 15 points at 1249.  The latter level is 1.2% above fair value, which leaves the cash market on track for a higher start.

The Greek drama this morning has quickly relegated yesterday's FOMC meeting to a distant memory.  The key takeaway from that meeting is that the triumvirate of hawkish presidents -- Fisher (Dallas), Kocherlakota (Minneapolis) and Plosser (Philadelphia) -- did not cast a dissenting vote.  In fact, the lone dissent was from Chicago Fed President Evans who supported MORE policy accommodation at this time.

It appears to us, then, that the FOMC is taking on a more dovish visage that could make it easier for the committee to implement further policy accommodation if it was deemed appropriate.

Separately, Fed Chairman Bernanke clarified in his press conference that the current directive suggests the federal funds rate is likely to remain at exceptionally low levels at least through mid-2013, adding that this means rates could remain exceptionally low even longer if economic conditions warrant.

That clarification adequately captures the message that has been embedded in monetary policy for some time. It has been supportive of risk assets and, importantly, it will continue to be supportive of risk assets barring an unexpected spike in inflation expectations.

Today, the ECB is center stage and new president Mario Draghi has become an overnight superstar.  The ECB, with its single inflation mandate, surprised the market and cut its key lending rate by 25 bps to 1.25%. 

The S&P futures, which were up 11 points ahead of the news, were up as many as 20 points a short time ago.  The futures have backed off a bit in the interim, but expectations for a higher open remain solidly entrenched ahead of Mr. Draghi's press conference at 9:30 ET.  The next thing everyone is waiting to hear is whether the ECB pledges to keep buying sovereign bonds. 

In other developments, the October same-store sales results from the retailers have been accented with a number of plus signs.  That is the good news.  The bad news is that many of the reports are below consensus estimates, so it is unclear how the reports overall will impact the market, which is very much in a macro frame of mind right now.

On that score, it is worth noting that the latest initial claims and the Q3 Productivity reports produced some positive surprises. 

Q3 Productivity increased 3.1% (Briefing.com consensus +2.8%) after a 0.1% decline in the second quarter; meanwhile, unit labor costs fell 2.4% (Briefing.com consensus -1.1%) after rising 2.8% in the second quarter.  Initial claims for the week ending October 29 dropped by 4,000 to 397,000 (Briefing.com consensus 401,000) and continuing claims for the week ending October 22 fell by 15,000 to 3.683 mln (Briefing.com consensus 3.675 mln).

These economic reports, while supportive for the market, are apt to be overshadowed by the aforementioned developments and the understanding that the government's employment report will be released tomorrow.

--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.