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This past week saw the Dow Jones Industrial Average gain almost 5% and break into positive territory for the year. Strength in the tech sector countered disappointment with the banks after JPMorgan Chase's(JPM) quarterly report, and the Nasdaq surged more than 8%. The main impetus for the rally, however, was the positive tune coming out of Europe.According to EPFR Global, developed market equity funds eked out inflows for the first time in five weeks. Investors put $2.4 billion in electronic traded funds last week, although the amount of outflows so far this year has reached $49 billion. "Overall there seems to be some equilibrium this week between optimists and pessimists," said EPFR Global Managing Director Brad Durham. "If you look at flows into electronic traded funds, which allow investors to express their changing sentiments with more immediacy than other types of funds, optimists would appear to have the momentum."Volatility has eased and the VIX index, Wall Street's so-called fear gauge, closed Friday at 28.24, finishing below 30 for the first time since Aug. 3. The index, which reflects options activity in the S&P 500, is easily perturbed, however, so investors shouldn't get too comfortable. The market has an insatiable appetite for more progress out of Europe.On Friday, Treasury Secretary Timothy Geithner projected a hopeful outlook for Europe's efforts to stabilize its sovereign debt situation once again, this time saying that the International Monetary Fund has "very substantial" resources to help the eurozone's financial institutions.So far, we've avoided a Lehman-like crisis across the pond, a nod to Geithner's first promise. But if policymakers fail to deliver anything less than a bank recapitalization plan by the end of the month, investors will likely feel cheated by all the talk from lawmakers.As Barclays Capital writes, "the bar that policymakers must clear to avoid further intensification of market stress is high and puts a premium on leaders to navigate a complex political environment and emerge with solutions that are substantial and well-focused."One of the best (and most substantial) pieces of news this past week was approval by all 17 members of the European Union to expand Europe's rescue fund. The bailout fund, known as the European Financial Stability Fund, is now cleared to lend resources of up to 440 billion euros. About 110 billion euros have already been committed to Greece.A new EFSF alone, however, comes nowhere near solving Europe's debt crisis conundrum. Protecting the banks is the next task on tap as Europe's policymakers try to put a thumb on just how much capital the region's financial system will require. The IMF has estimated a need for more than 200 billion euros, Standard & Poor's put the total at around 250 billion euros, and other economists have estimated upwards of 300 billion euros. After the lawmakers are done going back on forth on the math, they'll have to hash out a plan with Angela Merkel and Nicolas Sarkozy. There's still no indication of who will fund a recap program, although the German chancellor has said that banks should approach their own governments first before tapping into funds of the EFSF.On Saturday, the Group of 20 finance ministers meeting in Paris pledged to support banks' capital needs, while the EU vowed to make sure the bailout fund is used in a way that maximizes its effectiveness.During the talks, which began Friday, eurozone financial ministers outlined to other G20 officials their plan to stabilize the region, the Associated Press reported. That plan is expected to be revealed to the public at the Oct. 23 EU summit in Brussels. Officials also discussed expanding the role of the International Monetary Fund in helping to stem the crisis, and the G20 asked the organization to suggest ways it could help to prevent nations facing market pressure from slipping into crisis, the AP reported.IMF managing director Christine LaGarde said such measures would be discussed at the G20 summit in Cannes next month, the news agency added."What has been asked of us is instruments that are more flexible, more short term, that allow countries in good economic health but in difficulty to resist," LaGarde was quoted saying.Some disagreement remains on whether to increase the IMF's funding in order to deal with the current crisis.But the G20 Saturday said the IMF would have sufficient resources to "fulfill its systemic responsibilities," the AP reported, noting the statement was a hint leaders are open to increasing the fund's resources.Euro and China GDP on watchInvestors will likely scrutinize the action in the euro to gauge the market's confidence in Europe. David Song, currency analyst at Daily FX, says that the currency could continue to recoup losses from September if the IMF ramps up its role in supporting the eurozone.Next week may also bring a couple of surprises from China, which has taken a backseat to Europe of late. Investors may want to pay more attention as the recent economic data from China is showing some cracks. In the past week, inflation eased but remained at more than 6% and exports dropped, a sign that the worries of the West are weighing heavily on the East.The key number out of China next week is the government's estimate of third-quarter economic growth. A soft landing to around 9% would be a relief to investors. Barclays is expecting a slight slowdown to 9.2% from 9.5%. U.S. Earnings BonanzaNext week heaps on more than enough earnings for investors to digest in case Europe doesn't deliver details. Most strategists agree that results will be mixed."It's not going to be one broad brushstroke," said Peter Boockvar, strategist at Miller Tabak. "For every Google (GOOG)there's a Mattel(MAT) and vice versa."Some of the key names to watch are Well Fargo on Monday; Bank of America(BAC), Apple (AAPL), EMC Corporation(EMC) and Coca-Cola(KO) on Tuesday; PNC, Morgan Stanley(MS), US Bancorp(USB) on Wednesday; steel company Nucor Corporation(NUE), Philip Morris International(PM), chemical and glass producer PPG Industries(PPG), transportation company Union Pacific(UNP) and Microsoft(MSFT) on Thursday; and Honeywell International(HON) and Verizon(VZN) on Friday.On the economic docket, Wednesday's reading on inflation is expected to show a rise to a three-year high in September. The week also brings a round of regional manufacturing numbers as well as industrial production data. Barclays expects industrial production to get a small boost in September from gains in utility and mining output even though payrolls have largely moved sideways.Also due out are the producer price index and reports of existing-home sales and housing starts. Fed Chairman Ben Bernanke is slated to speak on Tuesday.So far, incoming U.S. economic data have shown remarkable resilience. Macroeconomic Advisors even decided to revise upward its GDP forecast for the second half after retail sales came in strong on Friday. "Since late September, we've added more than a percentage point to our estimate of third-quarter GDP growth, while our combined forecast for second-half growth is the highest since July," said a report by the research firm.>To contact the writer of this article, click here: Chao Deng.>To follow the writer on Twitter, go to: @chao_deng >To submit a news tip, send an email to: tips@thestreet.com.
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