There is a lot to take on this morning, with economic data, eurozone dealings, earnings news, and yesterday's historic FOMC meeting all playing a part in driving the market.

By design, we will begin with the last item, which has primacy value as it will be recalled regularly in coming weeks and months when talking about the capital markets.

The latest update from the FOMC brought several surprises, none bigger than the pronouncement that economic conditions are likely to warrant an exceptionally low level for the federal funds rate at least through late 2014 (emphasis our own).  This view was an offshoot of a compendium of rate forecasts from 17 FOMC participants, 11 of whom believed the first instance of policy firming was not likely to occur until 2014 or later.

The other surprise was that the Fed established an official inflation target rate of 2.0%, as measured by the annual change in the PCE price index.

In the interest of time and space, we took away the following from the most recent FOMC communication:

• Monetary policy remains very supportive for risk assets and equities in particular
• The expectation for a protracted low interest rate environment should boost the appeal of high-yielding dividend stocks
• QE3 remains a distinct possibility, with incoming data to dictate whether it moves from the FOMC meeting table to the Fed's balance sheet
• The attention to the PCE price index somewhat diminishes the importance of the CPI Index as a market driver
• The Fed is hopeful, but ultimately still very guarded about the economic outlook and the risks presented by strains in the global financial system
• The interest rate outlook continues to be a tacit blessing of a weak dollar policy.  This is a risk factor that bears watching to the extent that other countries with an export base and stronger currency attempt to level the playing field with protectionist trade practices.

The equity market rallied yesterday in the wake of the FOMC announcement, bolstered by the pledge, conditional though it may be, of ongoing liquidity support.

The advance by the U.S. market has helped spur gains in foreign markets on Thursday; meanwhile, the S&P 500 is poised to extend its gains at the open as the S&P futures are up seven points.

Rumors that Greece and private creditors may be able to work out a debt swap agreement have garnered some attention and have helped boost Greece's stock market 5.7%.  These reports, almost always attributed to unnamed sources, need to be viewed with some skepticism, yet some resolution to this sticky matter would certainly be a good thing.

Taking a turn on the latter phrase, the earnings results and economic data seen since yesterday's close are certainly a good thing.  The majority of companies topped the Capital IQ consensus earnings estimate, including Caterpillar (CAT), which beat by $0.55, 3M (MMM), which beat by $0.04, Netflix (NFLX), which beat by $0.18, and United Continental (UAL), which beat by $0.13.

There were some misses like AT&T (T), which came up a penny shy, Bristol Myers (BMY), which missed by two cents, and Eaton (ETN), which missed by three cents. 

Those misses notwithstanding, the good earnings news has trumped the bad, and Caterpillar, which derives nearly 70% of its revenue outside the U.S. and raised its FY12 guidance, is carrying the banner for the good today.  Very strong report from the industrial company that has been an uplifting factor for the futures market.

Similarly, the initial claims and durable orders reports have also provided support. 

Initial clams for the week ending January 21 increased by 21,000 to 377,000 (Briefing.com consensus 375,000).  Granted that is the wrong move directionally, yet the uptick did not expose any material deviation from the problems with seasonal adjustment factors that the DOL said impacted claims levels in recent weeks.  Moreover, the uptick did not alter the improving trend in the 4-week moving average, which decreased by 2,500 to 377,500.

Continuing claims for the week ending January 14 jumped 88,000 to 3.554 mln, which was right in-line with the Briefing.com consensus of 3.55 mln.  Despite the jump, the 4-week average for continuing claims fell by 15,750 to 3.569 mln.

The claims report paints a picture of the employment sector that is accented by stabilization and twinged with the light of improvement.

Separately, the durable orders report for December fit the mold of presenting better-than-expected fourth quarter data.  Even more important is that it fit the mold of a growing economy.

Durable orders increased 3.0% in December (Briefing.com consensus +2.0%) on top of an upwardly revised 4.3% (from 3.7%) jump in November.  Excluding autos, durable orders rose 2.1% on top of an upwardly revised 0.5% (from 0.3%) increase in November.

Orders for nondefense aircraft and parts (+18.9%) had a large part in the December gain, yet they had supporting company with orders for primary metals (+5.1%), machinery (+6.0%), computers and electronic products (+1.2%), and communications equipment (+2.2%) all seeing increases.

Nondefense capital good orders, excluding aircraft -- a proxy for business investment -- increased by 2.9%, more than offsetting a 1.2% decline in November.  Shipments, in turn, increased by 2.9% after a 1.0% drop in November and should factor favorably in forecasts for Q4 GDP.

The items mentioned here all appear to be factoring favorably as the S&P futures have been extending their gains throughout the morning.  The cash market is currently indicated to open about 0.4% higher.

--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.