The S&P gained 5 percent, with the market enjoying its first five-day winning streak since July. It was the best week for the Nasdaq tech gauge since July of 2009. The Dow finished within 25 points of its high for the day and closed the week up 4.7 percent. Despite the week’s strength, stocks remain in the red for the year. All 27 European Union finance ministers are set to meet Friday afternoon and Saturday. Economists said lack of concrete measures could leave markets vulnerable on Monday. The huge risk that we face on Monday is that the meeting in Poland will end without a concrete action plan. Friday’s mild volatility was in part due to traders adjusting their portfolios during so-called “quadruple witching.” The term refers to the phenomenon that takes place four times a year when several derivatives contracts expire at the same time those tied to market index futures, market index options, stock options and stock futures. But investors’ primary attention remains on Europe’s debt crisis, as the region’s finance ministers gather in Poland.

The squeeze started out this week after French President Nicolas Sarkozy and German Chancellor Angela Merkel vowed Greece would meet its obligations and remain in the euro zone. The remarks came after a conference call Wednesday with Greek Prime Minister George Papandreou. On Thursday, the European Central Bank, in coordination with the U.S. Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank, announced it would provide additional dollar liquidity to banks. The move was seen as pre-emptive effort to head off growing tensions in the interbank lending market tied to worries abut the exposure of banks, particularly in France, to Greek debt. The announcement boosted risk appetite, sending European and U.S. shares higher while lifting the euro and forcing U.S. Treasurys and German bunds to give back some of their recent safe-haven gains.

On a technical perspective, the S&P remains in an uptrend however buying pressure has seized. Currently in a holding pattern. 1234-1225 remain key technical resistance. 2nd line of resistance then targets 1275 range. Support remains at 1150 then 1120.

U.S. Treasury Secretary Timothy Geithner on Friday urged euro-zone finance ministers and the European Central Bank to work together to solve the region’s debt crisis and to enhance the power of the region’s rescue fund amid signs officials have yet to overcome divisions over how to proceed. Geithner is the first U.S. Treasury Secretary to attend an informal meeting of euro-zone finance ministers, a move that economists said underscores rising international worries over Europe’s sovereign debt crisis and fears it could spark a global financial crisis. Geithner’s presence signifies the anxiety and concerns across the Atlantic over Europe and will put further pressure on policy makers to reach some decisive actions. The Frankfurt-based ECB and euro-zone governments have clashed repeatedly over solutions to the debt crisis. The ECB strongly resisted calls to make private-sector bondholders share in the cost of bailouts.

Overall, moves in the market were somewhat subdued Friday, as news from the meeting in Poland is not expected until the weekend. Chandler said the focal point of the meeting is likely to be the expansion European Financial Stability Facility (EFSF), which is the bailout fund for Europe’s cash-strapped countries, including Portugal, Italy, Ireland, Greece and Spain.

A spat triggered by Finland’s demand for collateral from Greece in return for Helsinki’s participation in a second bailout program has raised tensions. Finnish Finance Minister Jutta Urpilainen said there was still no resolution of the country’s call for guarantees to back its contribution to the second Greek rescue package. Juncker told reporters some progress had been made on the issue and that ministers agreed that “if collateral will be provided, it will be done at an appropriate price. Juncker also said a decision on whether to disburse the next tranche of aid for Greece under last year’s EU-International Monetary Fund bailout will be made in October. Greece’s government could run out of money within weeks if the tranche isn’t released, Greek officials have said. Finance ministers welcomed new efforts by Greece designed to help it meet fiscal targets tied to the initial bailout. Fears of an imminent Greek default have roiled financial markets and triggered fears of a potentially catastrophic banking collapse in Europe.

Italy Rating Under Review

Moody’s Investors Service Friday said it would finish reviewing Italy’s Aa2 sovereign currency credit rating for possible downgrade within the next month, saying the country faces a challenging economic and financial environment. Moody’s cited the fluid political developments in the euro area, which is struggling with a deepening sovereign debt crisis. In June, Moody’s cited a rigid labor market and Italy’s rising debt financing costs. Italy has one of the largest public debt burdens in the world, equivalent to about 120 percent of gross domestic product. After Greece, that is the largest ratio in the 17-country euro zone. Italian bank UniCredit shed 7 percent even though the overall market was higher for a fourth straight day. Traders cited speculation that Moody’s would downgrade Italy as one reason for the weakness in European bank shares. While Italy has not followed Greece, Ireland and Portugal in seeking emergency aid, it has faced higher borrowing costs as debt worries have spurred investors to demand higher returns to buy its government bonds. Investors are also wary of European banks that hold large amounts of government debt from countries such as Italy that may be vulnerable to a downgrade.

Standard & Poor’s has Italy at A+ with a negative outlook while Fitch Ratings has it at AA-minus with a stable outlook. Moody’s rating is two notches above S&P and one notch above Fitch. Moody’s rating is two notches below the gold-plated Aaa status.

Week Ahead

President Obama’s debt reduction plan is set to land Monday in the laps of the 12 members of the Congress’ bipartisan debt committee. In recent weeks the president has said his plan would offer specific proposals that can achieve savings “more ambitious” than the committee’s $1.5 trillion target. He said it would be “balanced,” involving both spending cuts and tax increases. And he promised it would “stabilize debt in the long run.”

Federal Reserve holds a two-day meeting of its Federal Open Market Committee. Fed Chief Ben Bernanke said in late August the Fed would hash out the possibility of more easing options over a two-day period, a longer gathering than originally planned. Since then, expectations among bond market participants have focused on the possibility the Fed could engage in an effort dubbed “Operation Twist,” which would increase the average maturity of its portfolio by increasing holdings of longer-maturity bonds, swapped for shorter-term holdings. The end result is likely lower long-end rates — but not a big market impact.

In the coming week, the IMF meets in Washington and Europe will certainly be on the agenda. Ahead of that meeting, representatives of the BRICS (Brazil, Russia, India, China, and South Africa) are expected to meet to discuss whether they can help the European situation. Greek Prime Minister George Papandreou will be in New York Monday and is expected to visit the New York Stock Exchange.

Against that policy-heavy backgroup, a few earnings stand out. Oracle Corp. Lennar reports Monday. AutoZone, Carnival, CongAgra, Oracle and Adobe report Tuesday. General Mills and Bed Bath and Beyond report Wednesday. FedEx, Nike, Discover Financial, and report Thursday, and KB Home reports Friday.

The housing market will also be a focus when new and existing home sales data is released Tuesday and Wednesday. New data this past week showed a jump in foreclosure starts, signaling that a big wave of foreclosed properties will hit the struggling housing market early next year.

Monday
10 a.m. National Association of Home Builders survey

Tuesday
8:30 a.m. Housing starts

Wednesday
10:00 a.m. Existing home sales
2:15 p.m. FOMC statement

Thursday
8:30 a.m. Weekly jobless claims
10 a.m. FHFA Home Price Index
10 a.m. Leading indicators
4:30 p.m. Fed balance sheet