Stocks look to continue their rally after the major indexes erased nearly all of their losses from January. Last week saw the release of strong economic data, including January job and wage growth that came in well above expectations.

This week, Greece is likely to dominate the headlines and possibly the markets as well, at least as long as it plays hardball in negotiations. The country has until next Monday to ask for an extension of the bailout, but thus far Greece has refused. Without the bailout, Greece would quickly be unable to fund itself in euros. The natural reaction of Greek citizens will be to pull their euros out of Greek banks before the country changes their euros into new drachmas. Greece’s leaders say they want to stay in the eurozone though, and popular opinion agrees with them, creating a dilemma. Greece cannot both stay in the euro and reject the bailout requirements.

Depending on the outcome of this issue, markets could face two very different scenarios. The euro is currently around $1.13, in part due to the political changes in Greece that have made a disaster scenario for the euro more likely. A Greek about face could send the euro back towards $1.20 and higher as the crisis fades. Should Greece exit the eurozone, Morgan Stanley thinks the euro could fall as low as $0.90, a 20 percent drop that would rock global financial markets.

Were it not for Greece, the U.S. markets would be marching higher thanks to the strong economy and rising earnings. FactSet Research reports that 323 of the S&P 500 companies have reported and 78 percent have beaten earnings estimates. Earnings growth is 3.0 percent so far, above the 1.7 percent growth forecast at the start of earnings season.

We’re past the heart of earnings season, but some major companies still haven’t reported. Among those reporting this week are Cisco (CSCO), Time Warner (TWX), Tesla (TSLA) and Mondelez (MDLZ).

Economic data will be light this week, with January retail sales being the most noteworthy. Wholesale and business inventories from December could impact the next estimate of 2014 fourth quarter GDP growth and 2015 first quarter GDP estimates if they deviate from expectations.

Chinese trade data out over the weekend show the Chinese economy may be slowing more than anticipated. Total imports were expected to fall thanks to plunging commodity prices, but China imported fewer raw materials such as crude oil and copper versus a year ago. Later this week, the country will report inflation data for January. As always, Chinese data has a significant impact on commodity prices. In early trading, commodities markets didn’t seem perturbed by the weak Chinese data, with oil trading near its highs from last week and copper holding steady.

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A Seeking Alpha Contribution

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Stocks are set to close out a bullish week on a positive note after the Bureau of Labor Statistics announced a net 257,000 jobs were added in January, well above expectations. Wages climbed 0.5 percent on the month, the fastest growth since 2008. The BLS also revised jobs data from November and December upwards, to 423,000 and 329,000 respectively. The job growth in January may be a little overstated due to the BLS appearing to leave out job cuts in the oil and gas extraction sector, but overall there’s enough hiring in the economy to make up for job losses in the energy sector.

The S&P 500 came into Friday up 3.38 percent and is now in positive territory for the year, erasing the 3.10 percent loss in January. Stocks moved higher in early trading on the back of the strong jobs report. The sector winner on Friday was financials, which struggled in January. Higher interest rates means bigger profits for lenders.

Energy also helped push the market higher after oil prices rebounded sharply. At one point, crude oil was up roughly 20 percent from last week. The S&P 500 energy sector had gains of more than 5 percent coming into Friday trading. Although all sectors gained ground, the defensive sectors of utilities, consumer staples and healthcare lagged after leading in January.

Biotechnology weighed on the healthcare sector after Gilead Sciences (GILD), a $150 billion market cap company and a top holding in many biotechnology funds, announced a steep price cut for its hepatitis C drug. Back in December, biotech shares sank when AbbVie (ABBV) and Express Scripts (ESRX) signed a deal in which ESRX would sell ABBV’s new hepatitis C drug at a steep discount. In return, ESRX agreed to only sell AbbVie’s drug. Investors were concerned a price war could erupt and GILD’s move confirmed those fears.

The U.S. dollar also moved higher on the jobs news. With wages and job growth picking up in a month when coincident economic data was somewhat negative (which is why analysts were all forecasting slower job growth), the Federal Reserve will face greater pressure to raise rates at the earliest opportunity. The U.S. dollar was stronger against the yen and the euro on Friday as well, after falling for much of the week.

The strong dollar is starting to impact economic data, with the government announcing the December trade deficit climbed to $46.6 billion, in contrast to expectations that the deficit would fall to $38 billion. As the U.S. dollar strengthens, capital is likely to flow into the U.S., and this must be balanced by either increased U.S. investment abroad or an increased trade deficit. Since the formula for calculating GDP counts exports as a positive for growth and imports as a negative, the rise in the trade deficit will lower the GDP growth estimate for the fourth quarter of 2014. That said, the growth in the deficit is a positive sign because it reflects relative strength in the U.S. economy and the dollar.

Overseas, Greece held to its negotiating position despite intense pressure from Europe. The European Central Bank (ECB) announced it would no longer accept Greek bonds as collateral, which could starve the Greek banking system of euros. Greek shares tumbled on the news. The ECB is still providing emergency liquidity assistance, though that ends on February 25 if Greece doesn’t implement all of the existing bailout terms.

Further east, Turkey’s currency plunged to new lows versus the dollar after President Erdogan attacked the independence of the central bank. Saudi Arabia’s riyal came under pressure as well, even though the country’s reserves exceed its money supply. China’s currency reversed some of last week’s drop, but the central bank eased reserve requirements and currency markets are buzzing with rumors of a widening trading band. The yuan has been hitting the lower limit in trading recently and a widening of the trading band would allow for a larger drop in the currency.