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Fed could be a snooze, but these reports will be big

Expectations are low the Fed will provide any new policy insight in the coming week, and focus should stay on economic reports and a flood of earnings, from Apple, big oil, drugmakers and others.

In fact, strategists say more clarity on what the Fed might do should come from the employment report the following week. Market expectations put a less than 5 percent chance on the Fed raising rates at its two-day October meeting, and the odds are not even that high for the Fed's December meeting.

"I think a lot hinges on the employment report, whether December is generally live as well. The market's presumption is that the December meeting is barely alive," said Alan Ruskin, head of G-10 currency strategy at Deutsche Bank. He said expectations might rise if there were employment reports of even 175,000 in November and December. "These are conditions the Fed thought would warrant a tightening back in September. Why not now? I think December is probably more alive than the market presumes but we need the validation from the employment data."

Traders work on the floor of the New York Stock Exchange.
Getty Images
Traders work on the floor of the New York Stock Exchange.

The Nasdaq ended higher at 5,031.86, its best, highest closing level since Aug. 19. The Dow Jones industrial average closed higher at 17,646.70, as Microsoft posted its best trading day since 2000. The S&P 500 ended higher at 2,075.15, as information technology recorded its first four-week winning streak since November.

In the meantime, the first look at weakish third-quarter GDP is on Thursday, and economists are looking for growth of about 1.7 percent. Other key data includes durable goods Tuesday, and the employment cost index and personal income and spending Friday.

The gusher of earnings news continues with reports from big oil, like Exxon Mobil and Chevron, and drugmakers, Merck, Pfizer and Bristol-Myers.

Traders will also be keeping an eye on efforts in Congress to raise the debt ceiling.

"The bond market is really fighting with itself over a couple of things. You have the strength in equities which normally would be negative but against that you have these concerns about the debt ceiling," said Tom Simons, money market economist at Jefferies. Simons said the two-year note attracted buyers after the Treasury announced Thursday it was delaying Tuesday's auction of two-year notes because it might not be legally authorized to borrow money by the time the auction settles on Nov. 2.

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"I think it's not huge right now. It's significant in the front end but not the long end of the curve. If we go another week, it could be a bigger part," said Simons. "It's going to have to get closer to the end of the month with no progress for it to filter into the long end of the curve."

As for the Fed, it could tweak its language slightly when it releases its post-meeting statement Wednesday.

"A little more language about achieving their goals in the labor market might be one way to signal the market that they're getting closer to the exit," said Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch. "I wouldn't expect any major language changes. This is not the right meeting to do anything."

Many economists now expect a December rate hike if the economy does not slow significantly.

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Harris said the Fed could make a minor change in its statement Wednesday, to end some of the confusion in the markets. "One of the things that's been interesting is the kind of miscommunication between the Fed and the market. They might try to address this idea that the Fed is now zeroed in on the global situation and no longer views the labor market as its primary focus. And I think that's wrong. I think the Fed tried to tell the market the global situation warranted a tactical delay but fundamentally the economy's healthy, and more particularly the labor market," said Harris.

Harris said this week's third-quarter GDP may make the economy appear sluggish but the economy took a temporary hit from high inventories and trade. He sees growth rising to 2.8 percent in the fourth quarter, and running at a 2.7 percent pace next year.

"I feel comfortable with the idea the U.S. economy is still on track. The global shocks we're facing are being absorbed very well," he said. He added that the dollar's been rising for more than a year, oil's been falling and China has been weakening and the economy dealt with all of those. "The economy is adjusting to these shocks and looks like it should be OK going forward.

What to watch

Monday

Earnings: Xerox, Cheesecake Factory, Luxottica, Novocure, Rent-A-Center, Everest Re, Broadcom, Hartford Financial, Check Point Software

9:45 a.m.: Services PMI

10 a.m.: New home sales

Tuesday

Fed begins two-day meeting

Earnings: Apple, Merck, Pfizer, Comcast, KKR, Twitter, Panera Bread, Coach, Novartis, UPS, Ford, DuPont, Bristol-Myers Squibb, Alibaba, AK Steel, Anadarko, Teradyne, Aflac, Peabody Energy, Baxter, Airgas, Corning, Cummins, Canadian National Railway, Spirit Airlines, JetBlue, Restaurant Brands, TD Ameritrade, BE Aerospace, Reynolds America, Wyndham Worldwide

8:30 a.m.: Durable goods

9 a.m.: S&P Case-Shiller HPI

10 a.m.: Consumer confidence

Wednesday

Second day of Fed meeting

Earnings: GlaxoSmithKline, Deutsche Bank, Fiat Chrysler, Mondelez, Volkswagen, Amgen, F5 Networks, GoPro, Marriott, Vertex, Imax, LaQuinta, First Data, Buffalo Wild Wings, Western Digital, Anthem, Norfolk Southern, Northrop Grumman, Nintendo, Hershey, Yelp, Paypal, Valero Energy, Southern Co., Federal-Mogul, Generac, Timken, PG&E

2 p.m.: FOMC statement

Thursday

Earnings: Barclays, Royal Dutch Shell, MasterCard, Baidu, Starbucks, Sanofi, ConocoPhillips, Aetna, Air Products, Alexion, Delphi Automotive, Fortress Investment, Brunswick, NY Times, Johnson Controls, CME Group, Nokia, Praxair, Sherwin-Williams, Altria, Novo Nordisk, Ball Corp., Deckers Outdoor, Genworth Financial, Goodyear Tire, Pitney Bowes, Yamana Gold, Boston Beer, Outerwall, LinkedIn

8:30 a.m.: Jobless claims, Q3 GDP (Adv)

9:10 a.m.: Atlanta Fed President Dennis Lockhart in panel discussion

10 a.m.: Pending home sales

Friday

Earnings: Exxon Mobil, Chevron, Seagate, Brink's, CBOE Holdings, Rockwell Collins, Mylan Labs, Eldorado Gold, Public Service, Phillips 66, Rubbermaid, Aon, Calpine, Pinnacle West, A-B Inbev, AbbVie, Colgate-Palmolive, CVS Health

8:30 a.m.: Personal Income, Employment Cost Index

9:45 a.m.: Chicago PMI

10 a.m.: Consumer sentiment

10:50 a.m.: San Francisco Fed President John Williams

11:25 a.m.: Kansas City Fed President Esther George.

— CNBC's Fred Imbert contributed to this report.