Highlighting just how fickle equity markets can be, key indices managed to notch gains last week

in spite of precarious conditions in Europe ahead of Greek elec tions and disappointing economic data. For the week, the S&P advanced 1.3%, the Dow 1.7%, and the Nasdaq 0.5%. The week started on a sour note as investors faced Spains request for $125B to sh ore up its banks, followed by a raft of mostly disappointing economic data: unem ployment claims were up, retail sales were down, and inflation rose in May. Inve stors shrugged off the lackluster data and markets rose on hopes that the Fed wi ll agree to additional quantitative easing when it meets next week though this a ssumption is premature.[1] Fed Chairman Bernankes comments in a speech last week divided the talking heads right down the middle. While there are some who believ e the Fed will take action due to the disappointing economic data weve been seein g, there are others who believe the bad data isnt sufficient to force the Feds han d.[2] At the moment, it appears that the Fed is concerned both by the risk of diminish ing returns on its quantitative easing, and the potential moral hazard created b y relieving Congress of its fiscal responsibilities by taking further monetary a ction. Whatever action (or inaction) the Fed decides to take will be closely fol lowed by investors worldwide. The world held its breath over the weekend, waiting to see the results of Sundays Greek national elections, which could largely determine the direction the Europ ean crisis will go next. Late Sunday polls showed the pro-bailout New Democracy taking a slim majority over anti-bailout leftists SYRIZA. Because of a 50-seat b onus given to the winning party, the result gives New Democracy (and their pro-b ailout coalition partners) a projected 159 seats in the 300-seat parliament.[3] With the pro-bailout parties in the drivers seat, European policymakers have boug ht themselves time to raise more money for bailout funds and move ahead with pla ns to set up a centralized European regulator and deposit insurance to protect s avers. Signaling its relief and anxiousness to work with the new Greek state, th e German government indicated a willingness to loosen Greeces austerity requireme nts, as long as the Greeks stand by their obligations under the bailout agreemen t.[4] Despite the Greek vote, challenging days are still ahead for Europe. The regions leaders face difficult decisions on how to uphold their credibility, display fin ancial discipline, and avoid stoking contagion. They also need to make convincin g progress towards a comprehensive plan for lasting change.