Summers sweepstakes is done: Now, watch the Fed

Larry Summers, former Treasury Secretary.
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There's a modest global rally underway as Larry Summers withdraws from the Federal Reserve chair running. Everyone assumed that the taper was the reason bond yields were up, but now it turns out that Larry Summers may also have been a factor.

Yet don't go too far with that analysis. Ten-year Treasury yields down almost 10 basis points, from 2.90 percent to 2.80 percent, so expect interest rate sensitive groups like home builders to have a good day.

Summers 'fell on his sword': Gartman

Instead, watch the Fed's updated economic outlook, which the central bank will provide on Wednesday. If they raise the economic outlook, that may increase concerns about an aggressive taper. If they lower it, those concerns should be reduced.

Most global markets are up fractionally, though China was down fractionally.

The rally in emerging markets continues: Thailand and Indonesia closed up 3 percent. Many of these emerging markets have now regained close to 90 percent of the losses they experienced in August, though none of them are back to the levels in late May, before the taper talk began.

Last week, I noted that the bruising fight over Syria was not going well for the President, that he has used up much of his political capital in Congress, and that he may have to give up on his choice of Larry Summers as the next Fed chairman because he can't afford the fight. That's exactly what happened.


1) German elections: good and bad news for Chancellor Angela Merkel over the weekend.

First, the good news: Regional elections in Bavaria gave her regional sister party a landslide 49 percent of the vote. Now the bad: Her coalition partner in the national parliament, the Free Democrats, received only 3 percent of the vote.

You need 5 percent to get representation in the parliament in the national elections; failure to get to that level means Merkel's party may have to form coalitions with less desirable parties like the Social Democrats. There's even worse news: a new anti-euro party is polling well and could get 5 percent of the national vote on Sunday. That would be a big headache for Merkel.

2) earnings will quickly become a topic after this week. According to S&P Capital IQ, third quarter earnings growth is expected to be about 4 percent, while revenue growth will hit 4 percent. This is the same as Q2: With expectations low, companies are likely to get over the low bar. The economy is picking up, so there may be a modest taper. The fourth quarter is the big hurdle, with expectations of a 10 percent gain.

By CNBC's Bob Pisani