A schizophrenic and relatively thin market spiked higher in the late afternoon with the S&P stock index closing +1.8% higher.

Expectations of a coordinated interest rate cut on the part of the ECB (European Central Bank) served as the primary lubricant for the positive market sentiment.

Will this rally end in tears?

In the short-term, the rally may actually hold.

It is tough to fight the balance sheet of a Central Bank.

The medium to long term is a different story and will be driven by how soon tangible steps are taken to restore confidence in macroeconomic fundamentals.

Given the response thus far, however, it is difficult to be an optimist.

Not enough attention has been paid to stimulating the private sector and too many resources have been spent already in a dirigiste and monetarist approach to the economy's woes.

A conversation with a player who's active in the AfPak region drove home the inherent inefficiency of many government-run programs such as USAID.

That player argued that the entire AfPak region would be better off and widespread graft ("suitcases stuffed with cash") would drop significantly if USAID pulled out of the region.

More importantly, with fewer outlays, money could be given back to the taxpayer.

While some players made light of Russian Prime Minister Vladimir Putin's staged diving expedition, Putin's talk of a Eurasian union is not to be trifled with.

Putin will visit China soon for the first time in a couple of years.

In the corporate bond space, off-the-run secondary bonds continue to diverge from recent on-the-run bond issues.

With real-money investors saving their ammunition for new bond issues and dealer balance sheets under pressure, it is not surprising that off-the-run bonds are lagging even on a rally day.

Market Color will resume on Friday after a one-day hiatus.