(WAG) Optimism in the Market

The backdrop for today’s market action is the last Fed meeting of the QE2 era and a critical vote in the Greek parliament later today. Stocks appear to be discounting a happier outcome in the ongoing Greek Drama. We also saw relatively more momentum in some of the cyclical sectors on Monday.

This may be reflective of a less worried view of the growth question that has been weighing on stocks over the last few weeks. More likely it is reflective of a tentative bounceback from over-sold conditions in the hope of a second-half recovery. In any case, it is difficult to read much into the market’s modest gains over the last few days, particularly in the absence of any positive economic data.

In Greece, the reshuffled cabinet of Prime Minister George Papandreou seeks a crucial vote of confidence from parliament later today. The release of the next tranche of the original bailout package approved last year is all but assured, as long as the Greek government can show its willingness and ability to implement the needed tough austerity measures.

A successful vote of confidence will strengthen the Prime Minister’s hand and should go some way towards addressing the issue at hand. But we can rest assured that the larger Greek debt question will stay with us for quite some time.

The Fed’s last meeting before QE2 comes to an end gets underway today. The official statement at the end of the meeting tomorrow will be followed by a news conference from Fed chief, where we will likely get the Fed’s take on what planned to do with the huge amounts of securities on its balance sheet. There is no suspect with respect to interest rates and QE2 as the central bank has been successfully telegraphing its views to the market in recent days.

On the earnings front, Walgreen’s (WAG) reported better-than-expected EPS on inline revenue. Separately, the drug-store chain announced that it would not renew its deal with Express Scripts (ESRX), the pharmacy benefits manager, beyond 2011.

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