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What traders will watch in the week ahead besides Deutsche Bank

U.S. stocks will kick off the final quarter of the year with a week of major economic data, while concerns around Deutsche Bank hover.

The September employment report is the big news traders are waiting for, but September ISM manufacturing data due Monday will also be key since it showed a shocking contraction for the month of August.

"I think it's the jobs data, and the ISM report next week. Some of the high-frequency data, are they confirming the slowdown we saw mid-third quarter, or is that a blip?" said Russ Koesterich, head of asset allocation for BlackRock's Global Allocation Fund.


Trade could be choppy as history shows market volatility, as measured by the CBOE Volatility Index, has surged every October of an election year since 1992, according to quantitative analysis using Kensho.

Jeff Kleintop, chief global investment strategist at Charles Schwab, says he sees more volatility to the downside than upside right now. He also says the market is ripe for a pullback of 5 percent or so.

"We've probably seen a lot of the gains we'll get this year, and we'll see more ups and downs that will define the fourth quarter more than a passing of one direction or the other," Kleintop said.

U.S. stocks ended a choppy week slightly higher, after falling and rising with oil prices and then Deutsche Bank shares. The S&P 500 closed at 2,168.27 with energy the best-performing sector of the week.

New York–traded shares of Germany's largest bank hit record lows in the past week on mounting worries about the struggling lender that have evoked concern about another financial crisis. The German government ruled out state aid for the bank as it faces the U.S. Department of Justice's demand for $14 billion in settlement over mortgage bonds. Other media reports in the last two days raised concerns that a handful of funds are less willing to do business with Deutsche Bank.

Deutsche Bank AG branch in Boblingen, Germany
Krisztian Bocsi | Bloomberg | Getty Images
Deutsche Bank AG branch in Boblingen, Germany

But shares rebounded Friday in their best day since 2011 after an AFP report that the bank is close to a $5.4 billion settlement with the DOJ. CNBC has not independently confirmed the report, and there are reasons to be skeptical about the stated number.

"I think just given how depressed the name has been in the stock over the last couple weeks, you're getting a huge reaction in the stock on headlines either way," said Drew Forman, co-head of trading at Macro Risk Advisors.

Investors will be watching for any incremental developments on Deutsche Bank over the weekend, which is a three-day one in Germany since Monday is a holiday.

"I don't see any over-the-weekend rescue looming for Deutsche Bank," said Holger Mertens, head portfolio manager, global credit, at Nikko Asset Management. "What has to change here is the perception of the bank that is out there."

Another issue for markets to eye over the weekend is the official inclusion of the Chinese yuan as the fifth currency in the International Monetary Fund's Special Drawing Rights basket. The inclusion increases the attractiveness of the yuan, also known as the RMB, as an international reserve asset that central banks can readily use.

"The RMB joins the SDR formally on Oct 1. Some people would argue that ahead of the formal entry, they've been bending over backwards to keep the currency stable so afterwards, they might have less of a reason to keep it stable," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

Traders have watched the currency since surprise devaluations last August shocked global markets with concerns of negative spillover from a sharp slowdown in China's economy.

China's markets are closed next week for a national holiday, and barring significant developments around European banks, strategists generally expect U.S. markets to focus on domestic news. Analysts polled by Reuters expect the September ISM manufacturing due Monday to show 50.3 after a 49.4 print for the prior month. Friday's nonfarm payrolls report is estimated to show a rise to 170,000 for September after a print of 151,000 in August.

"I think if there's one thing that drives [markets next week], probably it will be payrolls because of the Fed," said Sameer Samana, senior global strategist at Wells Fargo Investment Institute. "That has some ramifications for almost everything else, and it's the biggest factor that has driven the markets over the last year."

Still, "people probably fixate on payrolls, but we'd watch the political side a little more carefully," he said.

The vice presidential debate is scheduled for Tuesday evening at Longwood University in Farmville, Virginia. The second presidential debate is set for October 9 at Washington University in St. Louis, St. Louis, Missouri.

— CNBC's Patti Domm contributed to this report.

Disclosure: CNBC's parent NBCUniversal is a minority investor in Kensho.

What to watch

Monday

9:45 a.m.: Markit manufacturing PMI

10 a.m.: ISM manufacturing

10 a.m.: Construction spending

Auto sales

Tuesday

Earnings: Darden, Micron

8:05 a.m.: Richmond Fed President Jeffrey Lacker speaks on the economic outlook

7:40 p.m.: Chicago Fed President Charles Evans speaks on monetary policy and the economy

Wednesday

Earnings: Yum Brands, Constellation Brands, Monsanto, RPM International

8:15 a.m.: ADP payrolls

8:30 a.m.: Trade deficit

9:30 a.m.: Minneapolis Fed President Neel Kashkari gives welcoming remarks at an event on "Early Childhood Development in Indian Country"

9:45 a.m.: Markit services PMI

10 a.m.: ISM non-manufacturing

10 a.m.: Factory orders

1 p.m. & 5 p.m.: Richmond Fed President Jeffrey Lacker speaks on "Does Federal Reserve Governance Need Reform?"

Thursday

Earnings: Helen of Troy, International Speedway, Ruby Tuesday

8:30 a.m.: Jobless claims

2 p.m.: Atlanta Fed live webcast on search process for new bank president and answer questions from the public

Friday

8:30 a.m.: Employment report

10 a.m.: Wholesale trade

10:30 a.m.: Federal Reserve Vice Chairman Stanley Fischer speaks on the economy and financial regulation

12:45 p.m.: Cleveland Fed President Loretta Mester speaks on Fed communications

3 p.m.: Consumer credit

3:40 p.m.: San Francisco Senior Vice President Mary Daly speaks on the U.S. economic outlook and the role of education in supporting the American dream

4 p.m.: Federal Reserve Governor Lael Brainard speaks on blockchain technology

*All times Eastern. Planner subject to change.