The Dow surged Tuesday on reports the European Union is hatching a plan to end the debt crisis in Greece, but just because the blue-chip index sits once again above 10,000 doesn't mean the latest threat to equities is over. Greece, after all, is but one wobbly domino in Euroland -- and that means investors should brace themselves for more tremors to come.Uncertainty over whether the richer euro nations of the eurozone would come to the aid of Greece has been clobbering the market, and anything that can soothe jittery traders, if only for a day, is welcome. The Dow Jones Industrial Average ($INDU) erased all of February's losses in one session, adding 150 points, or 1.5%, to finish at 10,059. The broader S&P 500 ($INX) rose nearly 14 points, or 1.3%, to 1,071, and the tech-heavy Nasdaq Composite ($COMPX) gained nearly 25 points, or 1.2%, to close at 2,151.

All in all, it was a good day on the Street. Just don't get used it, says David Rosenberg, chief economist and strategist at Canada's Gluskin Sheff, because "we are in for a period of heightened volatility." After all, the tattered balance sheets of the so-called PIIGS of Europe -- Portugal, Ireland, Italy, Greece and Spain -- are wild cards that today's market action fails to discount at its own peril.

A Clouded Outlook for Europe and Globally


"What is important is that the debt and debt-servicing burdens in the PIIGS are simply too high," Rosenberg told clients Tuesday. "And so, even if there is a bailout of sorts, the reality is that these governments are going to have to slash spending and raise taxes in draconian fashion, and this will cloud not just the economic outlook in Continental Europe, but globally as well."

Indeed, regardless of the latest moves to solve the Euroland debt crisis, Greece could very well be the touch-off point for market instability just as Thailand was in the summer of 1997, Rosenberg says. That may sound far-fetched, but as the economist points out, no one thought a devaluation of the Thai baht could ignite a major Asian financial crisis.

Jeffrey Kleintop, chief market strategist at LPL Financial, doesn't see such a conflagration coming, but he cautioned investors to gird themselves for more aftershocks. "The very pronounced market movements this year reflect an increasingly reactionary stance by market participants that we expect to continue," Kleintop wrote Tuesday.

Besides, the market has other hurdles to clear this week, Kleintop says, namely the bulk of monthly economic statistics coming from China on Wednesday and Thursday. Recall that the current sell-off began with concerns over a tighter Chinese credit policy and it's clear that news out the Middle Kingdom has the potential to whipsaw the market at least as much as the PIIGS.

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