1) Seasonal traders on alert: the S&P 500 had its best week since January 2013 last week, as inflows combined with under-exposed hedge funds moved the markets up.
Traders are generally optimistic, since we are entering a seasonally strong period for several reasons: the November-December two-month period is seasonally strong, trade during the six days before midterm elections has been up 75 percent of the time in the eight elections in the last 32 years, and companies that halted or reduced buybacks in October return to the market in November.
2) Lots of international news:
Brazil's Bovespa is being hit hard as incumbent Dilma Rousseff won a hard-fought re-election battle; 51.6 percent of the vote went to her versus 48.4 for the challenger Aecio Neves. The Dilma victory was obviously not priced into the market.
Of the 24 European banks that failed the stress test, nine were Italian. Greece only had three, Cyprus also had three.
The Nikkei 225 was up 0.6 percent overnight after a Japanese government official said the government should consider delaying a planned sales tax increase. This would follow on the heels of a similar hike in April.
3) While everyone will be fixed on the Fed meeting this Wednesday, many are talking just as much about the first look at third quarter GDP on Thursday. Consensus is for a gain of 3.1 percent. It was 4.6 percent in the second quarter, so if the third quarter reading hits the consensus we will definitely be in a period of above-trend GDP growth.
4) How important is a 10-percent correction? Financial journalists obsessed about this last week as we got close to a 10-percent decline, but it may not be indicative of much at all. Steven Wieting, global chief investment strategist with Citi Private Bank, writing in Barron's this weekend, noted that "moderate asset price declines have more often been false warning signs."
He said fundamentals and stocks rarely part ways for long, and that corrections not associated with recession have been much shorter in duration. Since 1950, the U.S. stock market has seen 29 discrete declines of 10 percent or more, but only 10 recessions, Wieting notes.