The pace of merger activity since the start of the year is at the fastest pace than at any time during the bull market that started five years ago last month. According to S&P Capital/IQ, the $960 billion in global deals so far this year, is just shy of the $1.1 trillion in deals during the same time frame in 2007. It also tops the $694 billion last year.
The merger activity could be a tail wind for stocks, particularly in sectors where the deals are focused. "I think it's a sign of confidence. It's a sign that CEOs are finally seeing things improve enough to where they're putting money to work. Health care seems to be front and center. Tech is a good hunting ground, especially small cap tech. You have a lot of bigger players with a lot of cash," said Burkly.
Besides the deal flow, analysts are also looking at the high percent of frothy IPOs that have come to market with negative earnings, the most since 2000.
But Curry said even if the market does sell off, it will still resume its climb. "We're in a secular bull market. We could go a lot higher," he said.
As for the bond market, Curry said it is signaling higher yields. On Tuesday, the short and intermediate dated Treasurys sold off, driving yields higher. Tuesday's 2-year note auction was disappointing. There is a $35 billion 5-year auction at 1 p.m. Wednesday.
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"The five is setting up for a break out," he said. "It says yields are moving higher." He has a target of 2.02 to 2.05 percent yield.
The 10-year yield was at 2.72 percent, the mid-point of its 2.60 to 2.82 percent range. "The risk is the 10s trade to the upside of that range. I think for now it's a choppy range trade," he said.
What to watch
Dozens of earnings are expected Wednesday morning, including Delta Air Lines, Dow Chemical, General Dynamics, Norfolk Southern, TD Ameritrade, EMC, Snapple, Federal Mogul, Omnicare, LPL Financial, Northrop Grumman, Ingersoll-Rand, Motorola Solutions and Snapple. Besides Apple and Facebook after the bell, reports are expected from Qualcomm, Texas Instruments, Raymond James, Zynga and ETrade.
Also ahead of the bell is Markit Manufacturing PMI at 8:58 a.m. ET. New home sales are reported at 10 a.m.