For the past six weeks, Wall Street traders have optimistically pushed the Dow Jones industrial average up nearly 4.8 percent on a belief that the U.S. economic recovery is finally gaining momentum.
On Monday, that cheerfulness will be put to the test as investors balance good news at home with lingering fears over the stability of Europe.
After three days of rioting, the Greek parliament early Monday morning approved a new set of austerity measures that are likely to cause much pain for its already-struggling citizens. The measures clear the way for the nation to reduce its debt and are a crucial step needed for the country to gain another bailout from the other European nations and the International Monetary Fund.
As a new week of trading starts, investors are worried that things in Europe can still unravel given the Greek's history of reneging on promises of fiscal responsibility. And the recent optimism over the U.S. recovery is still fragile enough to be undone by just a few bad economic indicators.
Traders' jitters were evident Friday after Greeks took to the streets in protest of the then proposed cuts including a 22-percent drop in the minimum wage and the elimination of one in five civil service jobs. This comes with the unemployment rate over 20 percent and the economy in the fifth year of a recession. Riots and fires continued all throughout the weekend.
The unrest and calls from some European officials for even stricter austerity measures caused widespread selling by investors Friday. The Dow closed down 89 points, or 0.7 percent. It was the worst day of the year for the market.
Even as the measures pass, Wall Street must still ask itself if the worst of Europe's troubles are over or if the crisis has just been temporarily delayed. Attention now shifts to a meeting Wednesday of European finance ministers, who will discuss additional bailout funds for Greece.
"Fear is going to be back this week," said Jeffrey Sica, president of Sica Wealth Management. "It's going to be a very, very volatile choppy week primarily because no matter how this turns out, there's going to be this aspect of skepticism that's going to keep investors very quick to sell."
Sica said a yes vote means a quick boost for the market before investors remember that Greece has voted for such measures in the past and continually broken its promises to make painful cuts. In his view, this year's rally isn't the result of overwhelming confidence. It's because a fear of Europe's problems has led investors to U.S. stocks which are safe by comparison.
"The heart of the issue is the rest of Europe _ and the next domino to fall _ which is Italy," he added. "You can ignore one small country, but you can't ignore (the European Union), the second-largest economy in the world."
Barry Knapp, head of U.S. equity portfolio strategy at Barclays Capital, also isn't optimistic about this week but not because of Greece. Knapp said that if any bit of U.S. economic data disappoints, even slightly, the reaction on Wall Street will be bad.
Retail sales and industrial production data along with speeches from members of the Federal Reserve will likely be market movers this week.
"I think we're in a spot now where the market is just much more prone to disappointment," he said. "The market doesn't have much margin for error right now."
Scott Mayerowitz can be reached at http://twitter.com/GlobeTrotScott.