The equity market certainly climbed the wall of worry yesterday, rallying on reports that EU leaders had cobbled together a credible plan to keep Greece and the eurozone from imploding.  The main thrust (and surprise) of the headlines was not so much that a solution had been worked out for Greece, but that leaders were focused on controlling contagion risk by enhancing the flexibility of the European Financial Stability Facility.

The dealings in the EU are not exactly a case-closed situation now.  The plan still needs to be approved by various parliaments, so there is still a risk that what has gone over well for global market participants might not play so well for local constituents.

As of now, however, the market appears to like what it has seen and heard out of the EU and it is breathing a little easier because of it.  That much is clear in the surge in prices for peripheral debt and the material drop in prices for credit default swaps.

So, after climbing a wall of worry yesterday, the market is now left hanging on the edge without a rope and harness as it awaits direction from the debt ceiling negotiations in Washington. 

Fortunately, good earnings has enabled the market to keep a firm grip on things, yet it is cognizant that the risk of losing grip builds as each day passes without a credible compromise on the debt ceiling and deficit reduction plan before the August 2 deadline.

Many had hoped today would be the day that a compromise was announced.  It still could be, and, as we saw yesterday, the market should respond enthusiastically in its free climb if word comes down from the mountaintop that a deal has been reached.

There is no such word at this time, so participants aren't necessarily relishing the thought of being left to hang over the weekend.

Risk appetites, therefore, have been dialed back a bit this morning.  To that end, the S&P futures are down two points, the 10-year Note is up nine ticks, the U.S. Dollar Index is up 0.2%, and gold prices have jumped 0.9% to $1601.80 per troy ounce.

Another long list of companies have reported earnings results since yesterday's close, including several Dow components. 

Briefly, General Electric (GE), Microsoft (MSFT), Verizon (VZ), and McDonald's (MCD) all exceeded the Capital IQ consensus estimate while Caterpillar (CAT) came up six cents shy.

Even though CAT boosted its revenue outlook and had generally good things to say about its outlook, the earnings miss and an acknowledgment of the weaker than expected economic recovery in the U.S. appear to have taken precedence as an early driver.  Shares of CAT are indicated 6% lower in pre-market action.

The weight of CAT and a soft consumer PC outlook provided by Microsoft have overshadowed the good earnings news elsewhere for the time being.  

There is no economic data today.  Even if there were, though, the market's attention would still be fixed on Washington.  With nothing new to report so far from the nation's capital, the market is left to hang and to contemplate its next move on the wall of worry.

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

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