A slew of Fed policymaker remarks and economic data will hit markets Wednesday.
"I expect they will reiterate that the door is open for a December rate hike," said David Kelly, chief global strategist at JPMorgan Funds. "The problem is markets are anticipating they aren't going to raise rates in December. So they have to keep reiterating (December) to keep the door open. The Fed is going to have to lean hawkishly … because they don't want to shock markets."
"If the economic numbers strengthen and the Federal Reserve talks in a more hawkish tone and acts in December, that will reduce uncertainty," he said.
Investors will scrutinize remarks from Federal Reserve speakers throughout the day Wednesday for any clues on the timing of a rate hike.
Fed Chair Janet Yellen testifies before the House Financial Services Committee on bank regulation and supervision at 10 a.m. EST.
In the afternoon, New York Fed President William Dudley is scheduled to give a news briefing on looking beyond the macro economy.
Fed Vice Chair Stanley Fischer speaks at 7:30 p.m. on central bank independence at the National Economists Club.
Before the open, Fed Gov. Lael Brainard speaks on a bank supervision panel in Frankfurt at 5:30 a.m., while Philadelphia Fed President Patrick Harker discusses social innovation capital at 8:45 a.m.
Wall Street will also get some key reports on the services sector Wednesday, with the PMI services index scheduled for 9:45 a.m. and nonmanufacturing ISM at 10 a.m.
Mike Arone, chief investment strategist for the U.S. intermediary business at State Street Global Advisors, expects the services data to be strong, against a generally mixed economic picture.
As "the week edges on, folks will be bracing themselves, there will be a high level of anticipation of (Friday's) employment report and what it means for the Fed. That's probably going to result in some short-term volatility on either side," he said.
The ADP employment report due at 8:15 a.m. ET could shed some light on Friday's nonfarm payrolls report.
"I think the Fed is beginning to pave the ground for a modest hike in December and markets are starting to price that in," said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
"I don't think the recent economic data has really swayed the Fed one way or the other. The Fed doesn't focus on any one data point," he said.
Other data scheduled for release include weekly mortgage applications at 7 a.m. and international trade data at 8:30 a.m.
The top-performing sector for the week so far, energy, could see further action Wednesday as oil prices react to weekly inventories due out at 10:30 a.m.
Still, earnings are not the focus for the market at this point, said Matthew Tuttle, CEO of Tuttle Tactical Management. "It's more about the central banks, companies and sectors that are rallying in spite of mediocre earnings."
"The market had a massive rally in October and a massive start to November. People are going to look for any excuse (to sell)," he said.
U.S. stocks added to November's strength so far with a higher close Tuesday, off session highs but more than recovering from an opening dip.
The ended up 5.74 points at 2,109.79, while the Dow Jones industrial average rose 89.39 points to 17,918.15.
The Nasdaq 100 ended up 0.32 percent at an all-time closing high of 4,719.05, topping the previous record set during the dot-com bubble in 2000.
The Russell 2000 ended about half a percent higher while the Dow transports lagged, closing down about 0.4 percent.