Yesterday had its share of subplots, twists and turns, heave-hos, and a closing sense of wondering what the heck is going on.

These elements manifested themselves in weak initial claims data, a surprising announcement from the IEA that it will release 60 mln barrels of oil from strategic petroleum reserves (30 mln from the U.S.) in an effort to hold down oil prices, word that negotiations around the budget deficit reached an impasse, and a report that Greece reached an agreement with the EU and IMF on a new five-year austerity plan.

The S&P 500 was down 1.9% at one juncture, yet it finished the day off just 0.3%, rallying back sharply after the Greece headline hit the wires.

We're not sure why it would react so strongly to the Greece headline.  We guess it was the type of thing that sounded just good enough for a market that tested key technical support at the 200-day moving average to force weak-handed short sellers to cover their positions. It beat the alternative, we suppose, of hearing on a day like yesterday that they failed to reach an agreement.

The fact of the matter is that the Greek parliament still hasn't passed the plan.  That vote comes next week and the outcome is as up in the clouds right now as the Greek gods.  In brief, nothing got settled yesterday, but the idea that things didn't get any worse with respect to Greece held sway in the rebound effort.

The IEA for its part held plenty of sway over the oil market.  Prices dropped sharply yesterday, more so because the announcement to release oil from strategic petroleum reserves came exactly at a time when no one expected it.  Prices had already fallen close to 20% from their recent peak, so officials got in an immobilizing sucker punch on speculators who were long oil. 

Today crude is trading under $91 per barrel.  Attention will now be paid to whether the IEA intervention, and the threat of more to come, can keep prices from rising sharply from current levels.  That will be a tall order if incoming economic data show improvement or further uprisings in the Middle East develop.

For now, though, the drop in oil prices has to be considered a positive change at the margin insomuch as it is helping to bring down gas prices and helping to quell inflation expectations. 

On a related note, the Chinese Premier declared that China has successfully curbed inflation.  That could ultimately be tantamount to a "mission accomplished" statement that comes back to haunt him, but Chinese investors certainly liked the thought as evidenced by the 2.2% gain in the Shanghai Composite on Friday.

This morning's action doesn't have quite as much drama around it.  The market is indicated to open relatively flat following some mixed earnings results and economic data that appeased the market for the time being.

Oracle (ORCL) topped the Capital IQ consensus estimate by four cents, but investors have been turned off somewhat by  a reported decline in hardware sales.  Shares of ORCL are indicated to open about 4% lower at this juncture.  Micron (MU), meanwhile, missed by ten cents and was indicated 10% lower in pre-market action.    

These pockets of weakness will weigh some on the broader market, but the third estimate for Q1 GDP and the May Durable Orders report have provided some offsetting support (the latter more so than the dated former).

Q1 GDP was revised up to 1.9% from 1.8% while durable orders increased 1.9% as well.  Excluding transportation, durable orders were up 0.6%.  The durable figures compared to the Briefing.com consensus estimates of +1.5% and +0.7%, respectively.  Additionally, the durable goods data for April was revised higher.

New orders rose from April across all categories with the exception of "other durable goods" (-0.8%).  This type of widespread growth is at odds with the recent slowdown seen in the ISM reports but it is in-line with the growth in industrial production. Despite the apparent weakness suggested by the declining ISM levels, this durables report suggests demand for manufacturing goods remains firm.

As expected, the aircraft industry led the turnaround. Nondefense aircraft orders jumped 36.5% after falling 29% in April. Defense aircraft orders increased 5.5% in May.

Surprisingly, the pullback in motor vehicle assemblies did not adversely affect motor vehicle orders. Orders increased 0.6% in May after falling 5.3% the previous month.

Business investment strengthened in May. Orders of nondefense capital goods excluding aircraft increased 1.6% after falling an upwardly revised 0.8% (from -2.3%) in April. Shipments, which factor directly into GDP, increased 1.4% and should provide a solid boost to our second quarter GDP forecast.

--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.