Below, courtesy of my Google homepage gadgets, are screenshots of the current (as of this writing) stock index numbers and headlines from the Financial Times.
Stocks are up dramatically so far this morning. But the headlines sure as hell don't tell us why. Moody's is crying about eurozone debt. Okay, we can discount what the crediting agencies say; they're not the most trustworthy source of financial estimates (despite the fact that, um, they're supposed to be so). But the OECD "highlights eurozone contagion risk" and those darn banks have to "scramble to plug capital deficits (which usually leads to immediately reduced lending, thus hurting expansion).
Yet stock indices are up a lot. The one headline that would seem related is "Equities rally on hopes for eurozone," but what artificial substances are people ingesting to have hopes for the eurozone if Moody's and the OECD are both telling people to run for the hills?
It could mean nothing more than that the sell-off in recent weeks was overdone, so this is a correction to that overcorrection. Also, the fears that the eurozone problems were now affecting even super-triple-A Germany's economy could have evaporated upon further review (because Germany's economy is so strong and its credit so sound, it was offering extremely low returns, so its recent "failed" bond sale doesn't necessarily mean people feared that even Germany couldn't sustain its debt – it could have just meant that there are other places with better yields right now; that would actually be good news, because it would indicate a slightly increased appetite for risk).
No, the boost to Wall Street is likely due to reports of a possible new initiative by EU countries to tackle their debt problems. Initial sketchy reports are that it would combine the German tough-love approach with the French money-shoveling approach. Markets love that stuff, apparently.
But we've seen any number of new initiatives that are launched by Europe's leaders and, no matter how sound the initiatives are, quickly deflated by market fears. So I won't hold out hope that this is a long-term sustainable rally.
If you're more optimistic than I am, then also remember that America's ticking time bomb of municipal, state, and federal debts and unfunded obligations (of many tens of trillions of dollars) is still out there, as is the largely ignored big debts of China's cities and regions.