Good news is good and bad news is bad, but a lack of bad news can be good, at least for investors. Stocks rose about 1% last week on improved trading volume, as third-quarter earnings reports—with the exception of Apple’s (ticker: AAPL)—came in generally as expected.

There was also a lack of bad European news and “this is a headline-driven market,” notes Andre J. Bakhos, director of Market Analytics for Lek Securities. Other than that, it has been a pretty theme-less market, he adds.

Last week marked a third consecutive week of gains, as the Dow Jones Industrial Average rose 1.4% to finish at 11,808.79. The Standard & Poor’s 500 Index picked up 1.1% to 1238.25. But the Nasdaq Composite bucked the trend, falling 1% to 2637.46.

Many investors intuitively know that stock movements among S&P 500 companies have been highly correlated of late, so much so that fundamental stock picking seems to have been hijacked by one big macroeconomic worry, that of a European banking crisis.

The other big macro worry, notes one CIO, has been a potential U.S. recession, but here again, while the macroeconomic news hasn’t been great, a lack of bad news has helped investor sentiment. “Can Europe ring-fence the problem banks? Maybe things look better than they did two weeks ago, but we are not out of the woods yet,” the CIO says.
 
Many look to a European summit to be held over the weekend, but already it seems that another meeting Wednesday will be even more important. “I’ve lost track of how many European meetings there have been,” Bahkos says.

Anyone who believes there will be a clean and definitive answer on Europe’s sovereign-debt problem is going to be disappointed for many months. For now, at least, it seems like the “risk on” trade is back, but European leaders have had a nasty habit of disappointing markets on Mondays.

The correlation within the equity market has never been higher, according to Bespoke Investment Group. When the S&P 500 advance/decline line (advancing stocks minus decliners) reaches plus- or minus-400 in a session, Bespoke calls that an all-or-nothing day. Since the end of July there have been 31 all-or-nothing days, more than the total for the 1990s. This year will top 2008 for such volatile trading days, according to Bespoke.

The volatility most likely is due in large part to high-frequency trading and investors’ heavy use in recent years of exchange-traded funds, which must rebalance their portfolios every day.

As noted, Apple fell sharply last week on disappointing earnings, but McDonald’s (MCD) reported strong third-quarter earnings Friday, which drove the stock to an all-time high of $92.32. Mickey D’s stock has been the best Dow performer by far since hitting lows in 2003 (Source: Barrons Online).