Will the Election Give the Market What It Wants?

One concern in the markets is that the election will end Tuesday night with no clear winner, as in the 2000 election. "Hopefully we have an answer right away, regardless of who wins, and then 15 seconds later, the question will be 'what are we doing with the fiscal cliff?" said Art Hogan of Lazard Capital Partners. The fiscal cliff is the dual expiration of tax cuts and the start of automatic spending cuts, starting Jan. 1, if Congress fails to act in the lame duck session.

"I think it's going to be an extremely interesting week, but I think the pace of activity increases," Hogan said. "I think we've been in wait-and-see mode for a while … I think any sort of constructive conversation about the fiscal cliff that shows a resolve gets market activity going again. That will be a trigger point. That would get people back engaged."

The October jobs report was the best in eight months, with 171,000 nonfarm payrolls added. But it failed to rally a market that had been lifted the day earlier by stronger manufacturing ISM and construction spending, and an improvement in jobless claims.

The bond market stayed in a close range this past week, with the 10-year ending the week yielding 1.728 percent late Friday. "Week over week, we're pretty much unchanged. That's surprising given how much of the data has been on the firm side, but we're waiting to see the election outcome, and presumably if Obama is elected we'll probably try to mount a rally and see how far we can go," said Ader.

He said the bond market views a Romney win as better for dealing with the fiscal cliff and debt-ceiling issues. Adams said it would also probably be a better outcome for the stock market, since status quo in Washington pits the Democratic president against a mixed Congress that would likely fight him. An unlikely change in the makeup of the House to Democratic majority, if Obama wins, would make it easier to resolve the cliff just as a Republican sweep in the Senate would make it easier should Romney win the presidency.

As for the market, it will probably not move ahead until it's clear how the cliff will be handled. "I think it's unlikely we can surge back without the removal of uncertainty. I think it's more likely that we test the 200-day moving average and move lower rather than higher, unless the election changes things," she said. The 200-day moving average on the S&P 500 is 1379. Adams said a Romney win would also be bullish in that it would boost capital spending, which companies have said they are holding back on due to uncertainty about taxes and the fiscal cliff.

Analysts said a Romney win would be a surprise and boost the stock market, as the market has been pricing in an Obama win. In the bond market, there could be a move in either case, said Ader.

"The feeling is if Obama wins, it's a 10 basis point rally, and if Romney wins it's a 20 basis point selloff," said Ader.

What to Watch

Monday

Earnings: Con Ed, Toyota, Rockwell Automation, Humana, Time Warner Cable, Southern Co, Transocean, Express Scripts, Plains All American, Tesoro, Weight Watchers

1000 am ISM nonmanufacturing

Tuesday

Election Day

Earnings: Nissan, CVS Caremark, Dish Networks, Computer Sciences, NYSE Euronext, Marathon Oil, PG&E, Office Depot, AOL, Liberty Media, International Flavors and Fragrances

1000 am JOLTS

0100 pm $32 billion 3-year note auction

Wednesday

Earnings: Telefonica, Time Warner, Burberry's, Macy's, Molson Coors, Wellpoint, Centerpoint, Energy, Qualcomm, CBS, Activision Blizzard, Prudential Financial, Monster Beverage, Whole Foods

0700 am Mortgage applications

1030 am Oil inventories

0100 pm $24 billion 10-year note auction

0300 pm Consumer credit

Thursday

Earnings: Disney, International Game Technology, Nordstrom, Public Storage, Kayak, Siemens, Duke Energy, Frist Energy, Kohl's, Manulife Financial, Tim Hortons, Advanced Auto Parts, Wendy's, Zipcar, Nvidia, Kohl's, Westar Energy, Duke Energy

0700 am Bank of England rate announcement

0745 am ECB rate announcement

0830 am International trade data

0830 am Weekly jobless claims

1030 am Natural gas inventories

0100 pm $16 billion 30-year bond auction

Friday

Earnings: JC Penney, Alliant Energy, Allianz, Brookfield Asset Management, Energizer, Foster Wheeler, Covidien

0830 am Import/export prices

0955 am Consumer sentiment

1000 am Wholesale trade

Follow Patti Domm on Twitter: @pattidomm

Questions? Comments? Email us at [e-mail]