"Deutsche Bank sneezing should not cause all of the other financials to catch the flu. The more important point is the uncertainty around the election season. That becomes the clear and present risk. What does it mean to the markets? We're going to assume it's negative either way," said Art Hogan, chief market strategist at Wunderlich Securities.
Analyst say markets have been somewhat comfortable with the idea of Democrat Hillary Clinton becoming president over Republican Donald Trump, if for no other reason than that she is much more predictable. If Republicans hold Congress, it would be status quo in Washington.
So if there's a change in expectations, there could be some volatility.
"It feels to me the basic point is the markets are not that focused now on pricing in some kind of big surprise, because they still put a relatively low probability on Trump being elected. The one thing that would be a risk is if he started moving up in the polls," said Bruce Kasman, chief global economist at JPMorgan.
Jim Caron, fixed income portfolio manager at Morgan Stanley Investment Management, said the election is one fact that makes October a month for uncertainty, and the bond market may stay range bound as a result.
"I think there's going to be enough uncertainty in the market, whether it's the election … it can go one way or the other. It just makes people de-risk, raise cash, stay closer to home and invest when there's opportunity. If there's a big move up or down people may react to it," said Caron.
The 10-year Treasury note was yielding 1.55 percent late Thursday, just about even with the 1.56 percent where it started September.
The S&P 500, down 20 points at 2,151 Thursday, was down 0.9 percent for the month of September, but the S&P was up 2.5 percent for the third quarter.
Another big factor for markets will be economic data, given the spotty reports in August. The big report is the September employment data a week from Friday, and that needs to be strong to confirm that the Fed is on course to hike rates in December. Economists expect 176,000 nonfarm payrolls and an unemployment rate of 4.9 percent.
"Given the August data we've been digesting in September has been pretty soft, as we get into October, one thing I'm going to be looking at is was August a blip," said Russ Koesterich, head of asset allocation for BlackRock's Global Allocation Fund.
Friday is the last day of September trading, and there are a few important reports including personal income at 8:30 a.m. EDT, Chicago PMI at 9:45 a.m. and consumer sentiment at 10 a.m.
Traders said a cloud could continue to hang over banks because of Deutsche Bank. U.S. financial institutions were dragged down Thursday on fear of contagion, after Bloomberg reported that 10 hedge funds that clear derivatives trades with the bank have withdrawn some excess cash and positions held at Deutsche.
Barry Bausano, chairman of Deutsche's hedge fund business, told CNBC on Thursday that while there have been some outflows, there have also been inflows, which he said is "part of the typical ebbs and flows" of the prime brokerage business. Deutsche still has about 800 hedge fund clients, but Bausano said there is probably a perception issue for the bank.
For traders, the headlines brought back shades of Bear Stearns, which failed when counter parties stepped away.
"The risk of contagion like we had in the financial crisis is a lot different than it was back pre-2008," said Caron, adding financial institutions have been stress tested and are subject to much stricter capital rules.
Jeff Kleintop, chief global investment strategist with Charles Schwab, sees another risk factor for stocks in October — corporate earnings. He said October may be a time of weakness for stocks and it would not surprise him to see a 5 percent or so sell-off.
"For October, I think the big one is going to be earnings. We're at the point where the gap between expectations and actual earnings is the widest it's been since 2009," said Kleintop. He said the difference between the next 12 months' estimates versus the last 12 months' earnings is 20 percent. "Given the global backdrop, there's just no way to get that kind of sales growth for that type of bottom line."
Earnings season starts right after Columbus Day, when Alcoa reports as well as major banks such as JPMorgan Chase, Citigroup and Wells Fargo.
"I don't think there's going to be a big bear market, because there's other supporting factors. I do think we could see a run of volatility," said Kleintop. "We might be overdue."