By Greg Peel

The Dow rose 181 points or 1.4% while the S&P gained 1.4% to 1387 and the Nasdaq added 1.3%.

Earlier this week, all talk was of correction. A correction was seen by many as inevitable, by some as healthy, and by others as a harbinger of bad tidings, with Europe again the spectre. But the past two sessions have brought an opposite mood. Wall Street is spinning on a dime, and doing so on low volume. This renewed volatility only serves to reinforce the reality that few investors are playing the game at present, and haven't been for some time. Short term traders are dominating the market, and their modus operandi is to get in a profit on small moves quickly before everyone else tries to do the same.

Last week's Fed minutes did not mention further stimulus, whereas prior the Fed has always hinted that further stimulus is always an option. Wall Street took this to mean no QE3, and noted that Operation Twist would come to an end in June. Despite the fact no QE3 reflects the Fed's view the US economy is sufficiently improving, traders took this as bad news. Wiser heads, however, assume that QE3 will be straight back on the table if circumstances decree. Others remain of the staunch view QE3 is inevitable.

The Fed itself has played down recent improvement in US employment, and last week's jobs number provided confirmation that Wall Street should not get too carried away. This week two FOMC members have individually reinforced the Fed's view that it will take a long time for unemployment to return to more normal levels. They have not made mention of QE3 but they have reconfirmed the zero interest rate until late 2014 stance. Last night's weekly new jobless claim numbers were weaker than expected, but then Easter was blamed.

This Fed-talk has appeased Wall Street traders. Oh thank God, the US economy is not as strong as we feared. We may still see Fed support for our trading efforts.

The market would probably see a lot less whipsawing if Wall Street simply concluded that QE3 is not there if it's not needed but will be if it is. And we also had the ECB hinting on Wednesday night it would cap rising Mediterranean bond yields with its own purchases. It seems pointless to fear a lack of funny money across the globe. As to where this will all lead us, well, that's another story.

Europe provides the biggest threat of "if it is", of course, and to that end last night saw the world hold its breath as Italy auctioned E2.9bn of three-year bonds. Sharp exhales followed when the auction was overbid by a ratio of 1.43x. This was enough to spark a rally in the euro. Never mind that the Italian government scored a borrowing rate of 3.89% when a month ago they were made to pay only 2.76%. Spanish bond yields fell in sympathy on the news.

That auction helped to put a dampener on the US Treasury's attempts to auction thirty-year bonds, which met only tepid demand. This week the Treasury has auctioned threes, tens and thirties. On Tuesday we were in "risk off" mode so the threes were well bid. On Wednesday we were buying stocks so demand for the tens was so-so. Last night we were very much "risk on" so demand was minimal. You just have to pick your day. The benchmark ten-year yield is currently at 2.05%.

The other topic du jour this week on Wall Street has been US earnings season. Last week the worry was that it would be the first dud season in years given earnings forecasts have been trimmed back all quarter. Then Alcoa comes out with a beat and now talk is that those forecasts have been downgraded too far. Hence we should now expect a lot of upside surprise, apparently, and that was another driver of Wall Street's rally last night. Traders were buying up techs ahead of Google's report post-close and the banks ahead of JP Morgan's and Wells Fargo's results tonight.

Google's result came out after the bell and was mixed, with earnings beating and revenue missing. Google shares are up 0.3% in the after-market.

China is the other bone of contention of course, with the hard landing-soft landing argument raging now for a good couple of years and the landing to date being nothing but soft, with plenty of scope for more stimulus. Last night saw the release of Chinese loan growth data and it showed growth, prompting economists to speculate that today's GDP result will perhaps be better than previously expected. At the moment consensus is around 8.3% but there have been "whispers" of 9%. [note from the FNArena editor: these rumours seem to have been sparked by a report issued by DBS Securities and are factually incorrect. DBS predicts the year-on-year GDP growth figure will come out around 8.3%, but the analysts also argue this year-on-year comparison is