Market Preview: Speculation Vs. News

Meantime, Bank of America Merrill Lynch was out pounding the table for secular stocks in the small- and mid-cap space on Wednesday, saying these names "typically hold up well and have the best showing when we are in a slow-growing economic environment."

The firm noted that its economics team is expecting U.S. gross domestic growth of less than 2% in 2012 followed by a slowdown to 1.4% in 2013, and said that investors should consider anteing up for quality stocks even they aren't cheap.

"Valuations are not particularly attractive at this point in time, but we think with the macro uncertainty investors should pay up for those companies that have posted consistent earnings growth," B of A said. "In addition, when small caps rally hard in the beginning of the year, the size segment tends to see a set back over next four months; Therefore we think that investors should stick with the stocks that can better weather the storm."

Among the names that came up in the firm's screen of buy-rated stocks projected to grow earnings by 10-20% were Cheesecake Factory(CAKE) , Petsmart(PETM) , Darden Restaurants(DRI) , Bed, Bath & Beyond(BBBY) , and Quest Diagnostics(DGX) .

As for Thursday's scheduled news, the situation in Spain should continue to be at the forefront of investor worries after Moody's opted to downgrade the country's sovereign debt rating to a notch above junk.

The ratings agency went to Baa3 from A3 and placed the lowered assessment on review for a possible further downgrade, citing Spain's increasing debt load in light of its request for a $125 billion bailout of its banking system as well as the tenuous state of its economy.

"The Spanish economy's continued weakness makes the government's weakening financial strength and its increased vulnerability to a sudden stop in funding a much more serious concern than would be the case if there was a reasonable expectation of vigorous economic growth within the next few years," Moody's wrote.

While this can't be a huge surprise to the markets, it does underline how serious the situation is and how problematic the proposed cure that Spain is seeking may ultimately be. Moody's also raised the specter of contagion if Greece ultimately leaves the single-bloc currency.