Oil and earnings the main attractions as markets await Fed

Oil prices and earnings headlines could sway stocks Tuesday, as markets await the Fed.

The Federal Open Market Committee begins its two-day meeting Tuesday morning, and it's expected to declare the end of its quantitative easing program when it releases its statement Wednesday afternoon.

In the meantime, there are durable goods and S&P/Case-Shiller home price data Tuesday, and a deluge of earnings. BP starts the parade of major oil earnings releases this week when it reports before the bell, and early reports are also expected from DuPont, Pfizer, Whirlpool, Starwood Hotels and Coach. After the bell reports include Facebook, Gilead Sciences, Electronic Arts and Panera.

Read MoreBP raises dividend despite oil price drop, Russia

Traders on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders on the floor of the New York Stock Exchange.

Stocks traded calmly on the surface Monday, with relatively low volatility. The Dow was slightly higher, up 12 points at 16,817, and the S&P 500 was slightly lower, off 2 points at 1,961. But beneath the surface there was turbulence. Some momentum stocks were sharply lower, like Tesla, off more than 5.5 percent, GoPro, down nearly 10 percent, and Pandora down 3.5 percent. After the closing bell, Twitter joined the momentum losers, falling more than 10 percent on a disappointing forecast.

Read MoreOPEC may be forced to act on oil prices

"Energy and things related to energy just got killed again today. Just obliterated," said Steve Massocca of Wedbush Securities. The S&P energy sector fell 2 percent, the second-worst performer after the materials sector. The energy equipment sub-sector suffered an even worse 4.2 percent decline, as traders speculated weakening oil prices would result in less drilling.

Massocca said high dividend payers were also under fire, and selling hit MLPs. For instance, Holly Energy Partners was off more than 2 percent, and Teekay LNG Partners was off more than 2 percent.

Read MoreWhy OPEC's losing its ability to set oil prices

West Texas Intermediate fell below $80 to a more than two-year low, after Goldman Sachs said WTI could hit $75 in the first quarter of 2015. Even though WTI moved back to $81 a barrel in a short covering rally, the oil-related stocks remained under pressure.

Cashin says two sides to oil coin
Cashin says two sides to oil coin   

Treasury yields moved lower Monday, as investors reacted to economic headlines. The Markit flash services sector Purchasing Managers Index, fell to a six-month low of 57.3 from 58.9 in September, and pending home sales rose less than expected.

Wells Capital Management chief investment strategist James Paulsen said the market is anticipating the Fed, and waiting to see if it makes any comments that would reveal how sensitive the FOMC is to recent market volatility. "It will be interesting to see how strong they are in their comments about the time table, staying lower for longer, and whether they reference global slowing," he said.

Read MorePro: History suggests 7% pullback coming

Paulsen said rates have moved closer to where they were before the market turbulence of mid-October. Stocks have also recovered most of their losses.

He said the market has been vulnerable to things like Ebola and slowing growth, as it really focuses on the Fed exit. "The Fed is the elephant in the room, which allows this other stuff to have impact," he said.

The market, prior to the October selloff, had been speculating stronger U.S. data could force the Fed to raise rates sooner. But during the selloff, market expectations for a rate hike were pushed back to late 2015.

"I think we're in the midst of turbulence that's going to play out until we re-set global interest rates, and the Fed gets in the game and starts to raise rates," Paulsen said.