The core PCE deflator could have posted another 0.1 percent monthly advance for October, the sixth in a row, according to Stephen Stanley, economist at Amherst Pierpont. He expects the year-over-year increase in the core PCE deflator to remain at 1.3 percent. There is also durable goods data Wednesday. There are a few earnings, including Hewlett Packard and Tiffany's on Tuesday, and Deere on Wednesday.
In the past week, the best-performing sector was consumer discretionary, up 4.5 percent, its best week in three years. Retailers rallied after taking a drubbing the week earlier as some big names reported disappointing earnings, amid worries about the consumer and health of the industry.
The energy sector was up 1 percent in the past week, and it was the weakest performer. West Texas Intermediate crude prices were up 2 percent, with the January contract closing at $41.89 per barrel Friday. Crude was down 8 percent the week before.
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"What's been encouraging is the rally broadened out where you had the Russell 2000, the bios participating and retail bounced back after a really hard last week. The fact Apple rejoined the rally this week gave the bulls a psychological boost," said Scott Redler, partner at T3Live.com. Apple was up more than 6 percent for the week, helped by a recommendation from Goldman Sachs.
"The constructive action by the bulls will remain intact as long as the S&P holds 2,065-ish. The longer we hold that pivot, which is the top third of this week's rally, the higher the probability we extend to 2,100, and the S&P tests the year high around Christmas," said Redler.
Many strategists agree the stock market can finish the year with a gain. But many do not expect the market to rally that much from here, and some see a sell-off looming in the first quarter. The S&P 500 is up 1.5 percent for the year, and the Dow is flat on the year.
Emanuel said he expects the market to continue to rally into the first quarter, in part on a crush of anticipated mergers as companies scramble to get deals done as far ahead of the presidential election as possible.
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But Ari Wald, technical analyst at Oppenheimer, disagrees. He points to a bifurcated market where many stocks have underperformed.
"We think there's something lurking here," he said. "Seasonally, it would make sense for it to play out in the first quarter."
Wald said there could be some rough spots before year-end but the market should move higher. "Around the first rate hike, there tends to be some volatility. I'd be more worried about the small caps there. We would rather sell Russell 2000. Big-cap growth looks great. Small-cap growth, not so much," said Wald.