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Market Preview: Feeling the Fear?

NEW YORK ( TheStreet) -- Judging by Wednesday's furious rally in the final hour, Wall Street is still content to trade on Greece's potential exit from the eurozone, as opposed to fearing it.

The surge got its mojo from a rather perfunctory statement from Europe's leaders ahead of their informal dinner meeting. More wishful than weighty, the sentiment boils down to a desire for everything to go right from here on in: Greece quickly forms a new government, decides to stick with the austerity program, stays a part of the single-currency bloc.

No word on eurobonds. No detail on what contingency plans may or may not be being made for a Greek exit. No real substance.

Yet it was enough to bring stocks back for an hour, a day at least. That means there just isn't enough fear out of there yet. Analysts at JPMorgan Chase addressed the subject in a strategy note earlier Wednesday.

Pavan Wadhwa, global rates strategist with the firm, puts a 50% chance on Greece exiting the European Monetary Union within the next two months and he sees "severe negative consequences" should this come to pass, including a continued deposit and capital flight from the country; a drop in access to capital markets for other sovereigns, most notably Spain and Italy; and good old debt contagion as he estimates "the Euro-area's exposure to peripheral countries is about ¿2.5T [trillion] in total."

Wadhwa expressed surprise that the potential direness of the situation didn't seem to be reflected in the current environment.

"In his [Wadhwa] view, markets are nowhere near pricing in such risk," the firm wrote in its research note. "He notes he was in NY last week and was surprised by how little the equity markets seemed to be pricing in back then the risk of a Greek exit from the Euro. Since then, of course, equity markets have sold off a little bit and seem to be a bit more focused on the probability that Greece will exit the Euro or that at least there will be significant issues going forward, given the second Greek election."
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