"There's no one around. People have no reason to sell," said Michael O'Rourke, chief market strategist at Jones Trading. "You had (Fed Chair Janet) Yellen and (ECB President Mario) Draghi come out at the end of last week, and I thought Draghi was very dovish and people were spinning Yellen as less dovish."
The market, buoyed by the idea of more central bank easing, also looked past geopolitical events. Ukraine Monday accused Russia of sending soldiers across the border to open a new front, with a caravan of a dozen tanks and armored vehicles reportedly entering southeast Ukraine. The incident adds even more tension ahead of Tuesday's meeting between Russian President Vladimir Putin, Ukraine President Petro Poroshenko and senior EU officials in the Belarussian capital of Minsk.
"I think what the markets are hoping for, at this point, is a short-term deal that stands down the armies. There won't be any kind of long-term deal," said Paul Christopher, Wells Fargo Advisors chief international investment strategist.
Besides the Ukraine meeting, there is batch of U.S. economic reports, including durable goods at 8:30 a.m., and S&P/Case Shiller and FHFA home price data at 8 a.m. Consumer confidence is reported at 10 a.m. There are also morning earnings reports from Best Buy, WPP Group, Sanderson Farms, Trina Solar, Bank of Montreal and Bank of Nova Scotia. Tivo, Smith and Wesson, Bob Evans and Analog Devices report after the bell.
But the wild card for stocks could be the shift in focus back to Ukraine, since the euro zone economy has shown signs of deterioration in recent months and Russian sanctions have been blamed. Oil prices, usually sensitive to geopolitical events, ignored the situation in Ukraine Monday and also in Libya, where rebels seized the airport.
"Oil's had a huge down move and all these people are (still) talking about inflation," said Marc Chandler, chief currency strategist at Brown Brothers Harriman. Chandler noted that the dollar index was at its high of the year Monday, and its poised for further gains. He said the global capital markets appear to be ignoring the geopolitical tensions.
"I would say investors are still being rational—that these geopolitical events are real, but they are not center stage. Maybe because there's bigger issues," he said, noting the ECB and Fed both have new economic forecasts next month. The market is awaiting further ECB easing, and the Fed meets in September, possibly revealing more information on its exit strategy.