The Challenger Employment report was good news for the market this morning and suggests Friday's payroll report will not be bad. The Challenger report showed that job cuts fell to their lowest level since July 2006. Employers announced layoffs that affected 42,090 workers. This was down from 71,482 in January.

The ISM non-Manufacturing Index came in at 53.0 for February. This was stronger than expected by 2 points and better than the 50.5 we saw in January. This was the highest level since October 2007. The strongest component was employment, which jumped +4 points to 48.6, This suggests the winter storms did not have as much impact on hiring as analysts expected.

The EIA oil and gas inventories for the week ended Feb 26th showed a gain of 4.1 million barrels for oil and 700,000 barrels of gasoline. Analysts were expecting only a 1.1 million barrel build in oil. Refinery utilization rose to 81.9% from 81.2% and crude oil demand rose slightly.

Oil prices fell overnight but rallied on the inventory news to a new high of $81.23. Last week prices rose on the inventory gain as well. Why traders are buying these announcement is a mystery.

The Fed Beige Book is due out at 2:PM.

German media said Chancellor Angela Merkel has held an extraordinary meeting with top level ministers to discuss the Greek debt crisis. The talks were reportedly held on Tuesday evening but the chancellery would not confirm or deny the meeting. Spokesman said the details might be announced at a regular government press conference later in the day. The overnight futures rallied +3 points on the news.

The Greek government planned to announce painful new spending cuts on Wednesday in an effort to secure additional funding either through the sale of bonds or a bailout from other EU nations. Cuts reportedly will include pay cuts for government employees, higher sales and consumer taxes and a freeze on government pensions. Rating agencies have warned of more damaging downgrades if severe cuts are not made. Official expect the VAT tax to be raised to 21% from 19%.

Prime Minister Papandreou said in a Tuesday night speech that all Greeks would have to accept painful sacrifices and warned of "catastrophic" consequences unless the country can borrow on the international markets at lower rates. Citizens are outraged at the request for cuts. Greek civil servants have their wages paid in 14 installments throughout the year. Twelve monthly checks plus a bonus on Easter, Christmas or summer vacation. Papandreou said the bonuses may be abolished.

Unions claim abolishing the bonus checks would be "a declaration of war." The various unions are scheduling strikes in protest on March 8th and 15th.

Greece says it needs EU help to borrow money in the debt markets. Evidently Greece failed at getting enough interested bidders to run the bond auction last week and is asking for guarantees from the EU so they can sell debt. EU officials have remained tightlipped over any potential bailout plan until Greece enacts these tougher austerity measures. Papandreou said on Wednesday that the announced cuts fully comply with what the EU wanted and now it is up to the EU to provide aid. He also said should the EU fail to provide aid Greece would appeal to the IMF as a last resort.

Papandreou is scheduled to meet with German Chancellor Angela Merkel in Berlin on Friday and with President Obama on March 9th in Washington. The ECB and the IMF are helping the EU assess the accuracy of the Greek finances after Greece admitted falsifying numbers in 2009.

The markets rallied at the open and are holding their gains as we move into the afternoon although there is some light weakness ahead of the 2:PM Fed Beige Book report. If the market can close strongly positive today it would be very bullish. The S&P is well over the 1115 resistance and in breakout mode.

S&P Chart

The NYSE composite is extending its move over the prior resistance at the 100-day average and approaching its next resistance target at 7450. This move over the 100-day is bullish and a move over 7450 would be even more bullish and would probably pull in some cautious investors from the safety of cash.

NYSE Composite Chart

Confirming the NYSE breakout is the rally in the Russell 2000 over 650 and the resistance high from January. This breakout over 650 this should produce some serious additional short covering and lead all the markets higher. This is very bullish should the breakout continue.

Russell 2000 Chart

The markets are poised for a critical test at the release of the Beige Book. If the indexes can avoid a sell the news event into the close and end with gains even small ones it will be one more confirmation signal that we are entering a new phase in the market. If we do have a sell the news event it may not be the end of the rally because we are over extended with five days of gains. The key would be how quickly any dip was bought.

Jim Brown