President Obama speaks Tuesday before the United Nations General Assembly, where the focus promises to be Syria but also Iran. Iranian President Hassan Rouhani, in an interview with NBC News, signaled an unexpected willingness to engage in diplomacy with the U.S. over his country's nuclear program. He, too, speaks at the UN on Tuesday.
Economic data will also be important since the Fed now has pushed the focus on its tapering decision to the Oct. 29-30 meeting. There is home price data Tuesday, new home sales Wednesday and pending home sales Thursday. The Fed will also watch personal income and spending data Friday, when there is also consumer sentiment. The Treasury also auctions $97 billion in 2- ,5- and 7-year notes Tuesday through Thursday.
Markets enter the week on a tentative footing after Friday's stock market selloff. Even with Friday's 185 point wipeout, the Dow was still 0.5 percent higher for the week at 15,451, and the S&P 500 rose 1.3 percent to 1709. There was lot of activity in Dow stocks Friday, as the 30 stock average will look differently on Monday.
Visa, Goldman Sachs, and Nike join the Dow, and Alcoa, Hewlett-Packard, Bank of America are exiting. Nike reports earnings Thursday in its first week as a Dow component. Other earnings are expected from homebuilders Lennar and KB Homes Tuesday, and BlackBerry reports Friday, after pre-announcing a stunning lossand write down.
(Read more: Monday's Dow vs. Friday's Dow)
"We could get more volatility — and lower volume at the end of next week because everyone's going to hold on and see what to do," said Tom O'Mara, head of equities at Cowen. "Then you'll get high volatility and high volume the following week. People are starting to bang around on this because of moves like (Friday). We're starting to see people worried about the market being fairly valued." O'Mara said it would not be surprising to see the S&P lose about 60 points in the next couple of weeks, before moving higher again.
Politicians are expected to fight up until the final hour ahead of the Sept. 30 deadline to pass a resolution to fund the government, and even then they could let the government partially shut down in a showdown over the debt ceiling. Congress has not let the government shut down since the Clinton Administration. House Republicans Friday pushed through a bill that would fund the government but de-fund the Affordable Care Act, also known as Obamacare.
The White House Friday evening said President Obama called House Speaker John Boehner and repeated that he would not let the full faith and credit of the U.S. be subject to negotiation, and that Congress has a constitutional responsibility to pass the budget and pay the bills.
"What it comes down to is a lot of this stuff is political and, and it's personal and people are putting their personal emotions ahead of the greater good, and it will cause problems," said Jack Ablin, CIO of BMO Private Bank. "What it means for markets — it's going to create unnecessary volatility. It will probably cast a shadow over our economy, and whether it undermines the growth we've got, I don't know."
Analysts say the Republican leadership is most likely going to prevent the government from hitting the debt ceiling, which Treasury says will be reached in October. "I think as you get closer and closer it will start wearing on the market," said Andrew Burkly, head of institutional portfolio strategy at Oppenheimer Asset Management. "To let the government shut down would be a risky move. The Republicans have more to lose from that just because of the midterm elections. When the government shuts down people blame Congress."
Flock of Fed Speakers
The Fed cited fiscal uncertainty as one reason for maintaining current policies after its meeting this past Wednesday. The Fed shocked Wall Street by holding its monthly purchases at $85 billion a month in Treasury and mortgage securities, while economists had expected it to pare back purchases by $10 to $15 billion.
Rising mortgage rates were also a concern for the Fed and Chairman Ben Bernanke, as were financial conditions and the economy. "Bernanke's mantra from day one was that it was data dependent. This is pretty typical. The market is way ahead of the Fed on this," said Ward McCarthy, chief financial economist at Jefferies.
The Fed speak starts Monday morning. Among them, a speech on the economy by New York Fed President William Dudley, who is viewed as being closely aligned with Bernanke and Fed Vice Chair Janet Yellen. Yellen is now expected to be named to Bernanke's seat when he leaves in January, since former Treasury Secretary Larry Summers removed his name from consideration.
Fed speakers were also busy Friday, and St. Louis Fed President James Bullard was one of four speaking Friday. He said the Fed could taper its quantitative easing bond buying in October if the economy improves enough, and he said Bernanke said it would be possible to hold a press briefing after the October meeting, giving the Fed an opportunity to explain any move.
"Bullard said it was a close call on Wednesday. That means if it's a close call, they're inclined to take the next step when there's an opportunity to do so. I think we'll have to see some improvement for it to happen as early as October," said McCarthy. He had expected the Fed to begin to taper in October, unlike many on Wall Street, because the economy's performance did not meet the Fed's expectations and it had to downgrade its view on the economy Wednesday.
(Read more: Lone dissenter says Fed confused the markets)
Ablin said the lack of tapering was a surprise, and the markets had been primed for it. "We're now running on the juice, but at the same time they're saying the fundamentals aren't as good as they thought. If we were looking for something tangible to sink our teeth into, we certainly didn't get it from them," he said. "This is our challenge. Do we want to continue to ride this momentum or at some point put a stake in the ground and say we're not going to play this game. We are willing to sit out and let the market run away from us a little bit, but we're not there yet."
Not long ago, oil was bubbling higher on concerns the U.S. would attack Syria, triggering trouble across the Middle East that would result in supply shortages. But Syria is now not an immediate threat, and oil prices have fallen.
Prices also have been weakening on optimism that Iran may be serious about negotiating with the West. Traders, however, are skeptical that the overtures of its new president to discuss its nuclear program would lead to a lifting of sanctions. Iran contends the program is not for weapons purposes. Much of Iran's oil is off the market, with exports totaling less than a million barrels a day.
"They're getting squeezed really unbelievably by the sanctions. He's got a short window to get something done here, and he's going to try it. Obama has always wanted to get something done, so the stars could be aligned for a breakthrough. It would be bearish for oil," said John Kilduff of Again Capital. West Texas Intermediate crude was at $104.67 a barrel late Friday, down 3.2 percent for the week.
Meanwhile, Germany's elections Sunday will also be a focus, but analysts expect Merkel to head the government even if it is with a different coalition. Merkel's conservatives are expected to win but the other coalition party is uncertain, and a grand coalition may have to be forged. "It's not a complete done deal that you're going to have Merkel with the exact same alignment, the CDU (Christian Democratic Union) with the FDP (Free Democratic Party), so there's some uncertainty," said Alan Ruskin, head of G10 currency strategy at Deutsche Bank.
(Read more: Crunch time for Germany as election looms)
Analysts say euro zone issues have been put on hold during the election, and they expect Germany to re-engage after the election.
"The German election yes is a milestone, and I think it will finally allow policy makers in Europe to actually be more accommodative," said Ablin.
—By CNBC's Patti Domm. Follow here on Twitter @pattidomm.
What to watch:
Earnings: Red Hat
8:58 am: Manufacturing PMI
9:20 am: Atlanta Fed President Dennis Lockhart
9:30 am: New York Fed President William Dudley
1:30 pm: Dallas Fed President Richard Fisher
President Obama addresses UN General Assembly
Earnings: KB Home, Lennar, Carnival, CarMax
9:00 am: S&P/Case-Shiller HPI
9:00 am: FHFA HPI
9:30 am: Cleveland Fed President Sandra Pianalto
10:00 am: Consumer confidence
10:00 am: Richmond Fed survey
12:30 pm: Kansas City Fed President Esther George
1:00 pm: $33 billion 2-year note auction
Earnings: AutoZone, Bed Bath and Beyond, Jabil Circuit, Progressive Software
8:30 am: Durable goods
10:00 am: New home sales
1:00 pm: $35 billion 5-year note auction
Earnings: Nike, Accenture, McCormick, WorthingtonIndustries
8:30 am: Initial claims
8:30 am: Real Q2 GDP (third)
10:00 am: Pending home sales
12:15 pm: Minneapolis Fed President Narayana Kocherlakota
1:00 pm: $29 billion 7-year note auction
9:15 pm: Kansas City Fed's George
Earnings: Blackberry, Vail Resorts
5:45 am: Chicago Fed President Charles Evans
8:30 am: Personal income
8:30 am: Boston Fed President Eric Rosengren
9:55 am: Consumer sentiment
10:15 am: Chicago Fed's Evans
2:00 pm: New York Fed's Dudley