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What a difference a month can make. Stocks have made an impressive turnaround, making October one of the best performing months in a very long time. The market has pushed higher as the dark clouds hanging over it have lifted. The economic outlook has turned out to be less worrisome than many feared and corporate earnings continue to surprise to the upside.

Most importantly, the European deal brought down global contagion risks, helping improve risk appetites. Many nay-sayers continue to find faults with the European deal, citing the lack of details, the inadequacy of the EFSF or a host of other reasons. And many of these points are valid. But let's not overlook the significance of what the Euro-zone leaders in general and Germany in particular have been able to present here.

This is the first multi-pronged plan that simultaneously provides for an orderly Greek default (they now call defaults 'haircuts'), bank recapitalization, and attempts to ring-fence the Italian and Spanish economies through a beefed up EFSF. The rising trend in Italian government bond yields even after the deal raise question marks over the adequacy of the plan and may prove to be its weakest link. But the deal is nevertheless a reflection of the Euro-zone leadership's commitment to the common currency and in that respect is confidence-boosting.

The key question at this stage pertains to the sustainability of the October rally into these last two months of the year. A lot will depend on the tone of economic reports in the coming days, but some temporary pause cannot be ruled out. I am of the view that the overall trend should be in the positive direction in these final months of the year.

A host of economic releases this week will provide further color on the domestic economy. With the October non-farm payroll report coming out this Friday, the labor market will remain in focus. Last month's report was particularly reassuring as it was the first favorable report months of disappointing labor market reads.

The expectation is for headline gains of about 90K and private sector gains of 120K. We will get a preview of the Friday report through Wednesday's ADP report and will be looking for the weekly Jobless Claims numbers on Thursday to sustain the recent positive trend. The other most important event of the week is the post-FOMC statement on Wednesday and Bernanke's press conference that same afternoon.

In other major economic reports, we get a look at the manufacturing sector through Tuesday's ISM report and today's Chicago PMI reading. Historically, the Chicago PMI has done a better job of foretelling trend in the national ISM manufacturing report than many of the other regional surveys. The service sector ISM report comes out on Wednesday.

Of the major earnings reports this morning, Humana ([url=]HUM[/url]) came ahead of expectations, while Cooper Tire ([url=]CTB[/url]) came short. MF Global ([url=]MF[/url]), the commodities broker, continues to fight for its life, though its prospects don't look that promising.

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