Big-cap stocks churn, small-cap stocks rally to new highs

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Stocks are churning for the third day as "fiscal fear fatigue" sets in. While the Senate has voted to move forward on a spending bill, Republicans and the White House are still far apart on the Continuing Resolution, so traders are saying, "Why should I get ahead of that?" and are largely sitting on the sidelines.

While stocks seem to have stalled, they have stalled at lofty levels. The is only 1.6 percent from the historic high it hit last Wednesday. The only somewhat nasty day was last Friday.

And the small-cap Russell 2000 is again at a historic high.

Bottom line: for big-cap stocks, this is another light-volume, low-volatility pullback. The same kind we saw in February, April, and August. Each time, the market advanced after a pause of one to two weeks.

The May-June pullback, which occurred when Mr. Bernanke first signaled the Federal Reserve may begin its tapering of bond purchases this year, was a bit deeper (7.5 percent decline for the S&P) and longer (a month), but it too didn't last.

Still, it's a bit worrisome that 10-year yields have dropped 10 out of the last 11 days, and stocks are not reacting. Not even interest-rate sensitive groups like home builders, REITs, and utilities.

Why? The simple answer is that with the Fed itself unsure of the economy, traders are concluding that the weak economy does not bode well for earnings in the second half.

One last note: the irony of the debate on the Continuing Resolution is that the new fiscal year will be better than the old one from a spending viewpoint. That is, there will likely be less cuts in state and federal spending and that should be a modest boost to GDP.

By CNBC's Bob Pisani