Focus Wednesday was on Vienna, where OPEC oil ministers were working toward a production agreement. There are also a few Fed speakers and economic reports. ADP payroll data is released at 8:15 a.m. ET, personal income and spending data at 8:30 a.m., Chicago PMI at 9:45 a.m., pending home sales at 10 a.m. and the Fed's Beige Book at 2 p.m.
OPEC's negotiations weren't going well Tuesday, but analysts still said a deal is possible. Early Wednesday, West Texas Intermediate crude futures for January jumped 7 percent to more than $48 per barrel on optimism, after a 4 percent decline Tuesday.
"I think they'll probably still come up with an announcement. If there's no announcement, the market will fall below $40 a barrel
very quickly," said Francisco Blanch, head of global commodity and derivatives research at Bank of America Merrill Lynch on Tuesday.
Stocks Tuesday saw slight gains, with the exception of the Russell, which was lower for a second day. The S&P 500 rose 2 to 2,204, and the Nasdaq closed at 5,379, up 0.2 percent after backing off a new intraday high. The Russell 2000 was down 0.1 percent at 1,328, and was off 1.4 percent in the past two sessions.
"I think in the short term, you could see a breather. The last three years, the end of November, early December period has been weak for the market. It's been down about 3 percent in each of the last three years. There's certainly potential for a short-term hiccup in the market. We have the Fed in mid-December, the Italian referendum [on Sunday]. There's a number of topics that could throw a wrench into things in the short term, but over the longer term, as long as what the market is expecting continues to transpire as far as the new administration is concerned, the market should hold up well," said Paul Hickey, co-founder of Bespoke.
December is also historically a good month for stocks, with the S&P 500 up 70 percent of the time in the last 20 years with an average gain of 1.3 percent, according to Bespoke.
As for bonds, yields were slightly lower Tuesday with the 10-year yield at 2.29 percent after moving in a range up to 2.39 percent. The 10-year was yielding 1.8 percent before the election. As yields have risen, investors have been dumping out of bond funds and into stocks on the view that the 35-year bond rally is coming to an end, and will end even faster if Trump's programs help drive up interest rates and raise the national debt.
"It seems the bond market has settled in with rates, at least for the time being. The market is comfortable with it. The stock market still has stars in its eyes," said Ward McCarthy, chief financial economist at Jefferies.
The stock market's move higher since Election Day has not lifted all boats equally and analysts expect some of the stocks and sectors that have seen the biggest moves in the Trump trade to give back some gains.
Lori Calvasina, chief U.S. equity strategist at Credit Suisse, said small caps are getting close to a valuation where she would turn neutral on them, but for now they are still attractive.
"Over the next 12 months, our models say small cap/large cap relative valuation is relatively flat. I think there were the things that got this party started — the deeply compelling valuation story. Then we had a reason to shift to domestic from international exposure due to protectionist comments from Washington," she said. She said the fact that small caps pay a higher average tax rate than large caps would make them big beneficiaries when the Trump Administration and Congress cut corporate taxes, as proposed.
"Capital goods is by far the most overvalued" sector, she said. But financials have outperformed, and they are still attractive. The Financial Select Sector SPDR (XLF) is up 12.5 percent, on pace for its best month since October 2011.
"Relative to the market and relative to history, when I look at something like the banks, which have had a heck of a move, I feel that has a way to run. The group was digging out of a massive hole," Calvasina said.
She said consumer services, which includes restaurants, remains very attractive in both the large- and small-cap universe.
Calvasina said the median forward P/E on an unweighted basis for the S&P 500 is 17.9 times. She said that is still reasonable, with the peak at 18.6 over the summer. "There's still some room to go," she said.
Fed speakers Wednesday include Dallas Fed President Rob Kaplan speaks at 8 a.m. at the Economic Club of New York. He then appears on CNBC at 11 a.m. Fed Gov. Jerome Powell speaks in Washington at 11:45 a.m. and Cleveland Fed President Loretta Mester speaks in Pittsburgh on the economy at 12:35 p.m.
Earnings from Royal Bank of Canada and American Eagle Outfitters were due before the bell. Guess, La-Z-Boy, Pure Storage, Box, Synopsys and PVH are reporting after the close.