Crisis fatigue may be setting in.
To put it another way, financial markets and many consumers may just be getting tired of feeling bad after three months of severe emotional stress.
European leaders on Thursday unveiled their latest plan to end the 2-year-old debt crisis that has threatened another global banking meltdown.
Though long on hope and woefully short on details — for example, how exactly the $600-billion Eurozone rescue fund will be beefed up to a promised $1.4 trillion — the plan sent stock markets worldwide rocketing Thursday.
Maybe even more surprising, markets held on to most of their gains on Friday. French stocks eased just 0.6% after soaring 6.3% on Thursday. Italian stocks were down 1.8% after a 5.5% jump a day earlier.
Wall Street also kept the faith. The Dow Jones industrial average closed Friday up 22.56 points, or 0.2%, at a three-month high of 12,231.11, after Thursday's 339-point, 2.9% surge. The broader market was little changed Friday.
Year to date, the three best-known market indexes now are back in the black after recovering most of the late-summer dive: The Dow is up 5.6%, the Standard & Poor's 500 is up 2.2%, and the Nasdaq composite has a gain of 3.2%. It's not much, but it beats near-zero returns on cash.
Equity investors had more to take to the bank Thursday than just European promises. Wall Street bulls had been arguing for months that the U.S. economy wasn't falling off a cliff, despite the market's insane volatility.
Confirmation of the non-recession came in the government's report that the economy grew at a 2.5% real annualized rate in the third quarter, the fastest pace in a year.
And here's the clincher: Americans' personal spending rose at a 2.4% annualized rate during the quarter, rebounding from a 0.7% pace in the second quarter, even as consumer confidence continued to crash.
In September alone, personal spending jumped 0.6% even as incomes rose a mere 0.1%, government data on Friday showed. That meant that consumers overall were dipping into savings to sustain their spending or were borrowing to do so, or both.
So to sum up September, while stock prices were crumbling, recession talk was rampant and Europe seemed ready to implode, Americans headed to the mall and to the car dealer to feel better.
The other possibility is that many people are spending just enough to barely stay alive and have little choice but to cut into savings, given dismal income growth.
As for the stock market's big rally Thursday, the usual suspects were in the mix, including piling on by day traders and buying by bears who had previously sold stocks "short," betting on further declines.
But there were plenty of institutional investors who were poised to jump back into stocks that had been beaten down to one-year lows or worse in September and early October.
The market already had been in rebound mode since Oct. 3, helped by upbeat economic data and by the initial wave of third-quarter corporate earnings reports. But Europe was holding some investors back.
As Andrew Busch, public policy strategist at BMO Capital Markets in Chicago, put it earlier this week: "Our U.S. clients are frustrated because they see positive things happening in the U.S., and they want to put money to work, but they're getting jerked around by these tremendous swings in confidence."
Given the level of pessimism in markets in September, Busch said he tried to frame it for clients as a black-or-white proposition: "Either the world is coming to an end, or it isn't."
As long as Europe posed the threat of a Lehman Bros.-type financial meltdown, the end-of-the-world defense for staying sidelined made some sense. If the Europeans achieved anything Thursday, they appeared to forestall Armageddon yet again.
But for how long? There remain many global investors who believe that the Eurozone ultimately will break up. They say Germany and France won't be willing to make the further sacrifices necessary to save the deeply indebted, economically struggling southern states of Greece, Italy and Spain.
France is desperate to keep its AAA credit rating. If it puts too much of its own wealth on the line for the Eurozone rescue fund, that rating will be in jeopardy.
What's more, unlike the Federal Reserve (which meets next week), the European Central Bank has never been willing to go all in to keep the European economy afloat. A double-dip recession already is a serious threat for the continent, yet the ECB continues to hold its benchmark short-term interest rate at 1.5%, the highest of any major central bank.
The ECB's only mandate is to fight inflation, regardless of the economic cost.
But that mandate may be challenged soon if interest rates on Italian and Spanish bonds continue to rise. On Friday, the market yield on 10-year Italian bonds surged to 6.02%, up from 5.88% on Thursday and the highest since early August.
That's going in the wrong direction if the Europeans hope to maintain confidence that their rescue plan will succeed. Italy's borrowing costs must fall, not rise.
As for stock investors, they have plenty to worry about besides Europe in the near term. For one, if the so-called super committee of U.S. congressional negotiators fails to specify $1.5 trillion in future budget deficit cuts by Nov. 23, the nation's credit rating could be set for another downgrade.
But this month, crisis-fatigued investors who've been intent on seeing the sun through a thick layer of clouds have been rewarded for sticking with equities. The Dow is up 12% in October.
The big-money players who've stayed sidelined and are in the red for the year, meanwhile, have to make a decision: With the market about to enter what are historically its two strongest months of the year, do you go with the flow — or hold back and risk falling further behind?