Traders, scratching for a market catalyst, may find it in the flock of Fed speakers on the calendar Tuesday.
Monday's session was quiet, both in stocks and bonds. "If anything's going to stir the markets up. It's going to be something that drops in out of the blue," said Ward McCarthy, chief financial economist at Jefferies.
Treasury yields drifted lower Monday, as markets continue to adjust to the Fed's unchanged outlook for two more rate hikes this year. The Fed raised rates last week for the third time in a decade, but it kept its forecast at two more rate hikes for 2017, while the market expected a more aggressive schedule.
"Right now, it's hard to say what's going to capture the market's attention. The market has put last week's hike in the Fed funds rate in a positive light. I think part of the reason the market response has been positive was [the Fed is] not going to four rate hikes," said McCarthy. The two-year note was yielding 1.29 percent late Monday.
Tuesday's speakers include New York Fed President William Dudley, who speaks at 6:35 a.m. in London, while Boston Fed President Eric Rosengren speaks in Bali, Indonesia. Kansas City Fed President Esther George speaks on the economy at noon and Cleveland Fed President Loretta Mester speaks at 6 p.m. ET on the outlook and communications.
Besides the Fed, the markets will continue to watch the progress being made by Republicans in their effort to repeal and replace Obamacare.
"This market's just waiting to get through all this drivel, all that has to happen before they start negotiating tax cuts, and frankly health care is obviously the first item on the list., but the only reason health care matters from the market's standpoint is it's an obstacle to tax cuts," McCarthy said.
House Republicans are expected to vote Thursday on the Affordable Care Act's repeal and replacement. That would be a small step toward the repeal, which has to pass the Senate as well. The health care replacement is seen as a necessary step before Congress begins to focus on tax reform, which has supported the stock market rally.
So far the markets have been patiently waiting for fiscal stimulus, though some strategists say the lack of action is weighing slightly on the dollar. K.C. Mathews, chief investment strategist at UMB Bank, said the markets should give Congress until summer break to come up with something.
"If you don't have something concrete by then, that may be the catalyst for a correction," said Matthews.
But Mathews said he's bullish and expects the promise of growth to keep bolstering stocks. "You have this overlay of hope with fiscal policy," he said.
Earnings are expected Tuesday from General Mills, Lennar, Canadian Solar, Lands' End and Cheetah Mobile. FedEx reports after the close, as does Petrobras, Silver Wheaton and Steelcase.
Current account data for the third quarter is released at 8:30 a.m.