"The bulls are making the case that we're up 25 percent for the year and in most cases, you run even further in the final two months—people are talking about 1,850 on the S&P," said Art Cashin, director of floor operations at UBS Financial Services. "We're up 25 percent for the year and we haven't been up that much since 1997. So not to dampen the parade, but we want to keep an eye on frothiness."
Last week, the Fed's monetary committee noted that it saw improvement in economic activity and labor market conditions but had "decided to await more evidence that progress will be sustained before adjusting the pace of its purchases."
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The central bank is not expected to begin tapering until 2014, due to recent economic data and the latest political impasse over government spending.
Investors will also be looking for further clues from the government's monthly employment report due at the end of the week. Economists expect to see 125,000 jobs added according to economists polled by Reuters, which would be the second-lowest number of jobs added of 2013, and that the unemployment rate has ticked up to 7.3 percent from 7.2 percent.
On the economic front, August factory orders slipped 0.1 percent following a 2.4 percent drop in July orders, while September factory orders climbed 1.7 percent, in line with estimates, according to the Commerce Department.
"I don't think the stock market is anywhere close to a bubble," Thomas Lee, chief U.S. equity strategist at JPMorgan told CNBC. "The median P/E in the market today is under 15 times and high yields tell us that the P/E should be over 17 times right now. So we're still trading at a huge discount and in terms of economic growth, I don't see any evidence that we're peaking."
Lee has a 1,775 year-end target on the S&P 500, but says the level will "not be any obstacle" for the market.
"There's a tilt that's going to happen back into cyclicals into year end," he said. "Some of the hedge funds are starting to increase their exposure to cyclical stocks, especially basic materials."