It was a day of schizophrenic and choppy trading in the markets with stocks closing in positive territory despite a strong morning sell-off.

Corporate credit spreads were marginally tighter but cash bonds, particularly financials, felt extremely heavy.

The lack of investor demand for corporate and financial bonds stemmed from a strong underlying unease and broader risk aversion.

Within the world of credit, high-grade nonfinancial companies seem to be the least bad class out there but the entire credit asset class is due for a further re-pricing at some point in the future.

Credit spreads are simply too tight considering the macroeconomic backdrop.

Some of the European banks are also experiencing acute dollar funding issues and this is spilling over into their general risk appetite for U.S. dollar denominated paper.

The EFSF (European Financial Stability Facility) headline lent some support to the markets but it will take a lot more than a couple of headlines and statements to rectify Europe's deep sovereign woes.

Given the choppy nature of the markets, playing it as close to flat as possible is probably the smart play for a lot of players right now.

A large one-day drop in stocks is not far-fetched but given that there are so many investors that have turned bearish on the markets recently, we may not get that correction just yet.

The correction will likely occur just when players have become complacent, soothed and put into a lull by sweet words of support from the ECB (European Central Bank) or the Federal Reserve.

Initial jobless claims numbers are out on Thursday and players will be watching Friday's payroll and unemployment numbers closely.