US stocks fell slightly last week after an unpleasant surprise in Chinese data, and investors could be in for another volatile week, even if earnings reports continue to impress.
The fourth quarter is seasonally strong, largely because of the shopping splurge in the US. That still appears to be on the cards this year, but there are an unusually wide range of spoilers this time around. These include uneven earnings and growth data, the US presidential and suddenly wide-open congressional elections, Brexit and, of course, the Federal Reserve's promise to raise rates by the end of the year.
So far, it's been a mixed earnings season, with a report from Alcoa that was more of a shock than a disappointment as the aluminium giant said even its "fast-growing" businesses processing materials for aircraft and other applications slowed down in the latest quarter. Alcoa's report weighed on other commodities producers.
Elsewhere, earnings were better, hinting that the third quarter could be the first of the year so far to see aggregate profit growth.
"There is a very real chance the earnings recession could be over with a small gain in Standard & Poor's 500 earnings the third quarter," said Ryan Detrick, senior investment strategist for brokerage LPL Financial.
Some of the nation's biggest banks, including JPMorgan Chase and Citigroup, posted earnings in excess of expectations. The gains in the financial sector were dulled by fallout from ethics controversies at Deutsche Bank and Wells Fargo which has claimed Wells Fargo's chief executive and left Deutsche on the brink of a liquidity crisis.
In a good sign for consumer spending, Winnebago saw strong growth in demand for the camper vans and trailer tents economists rank as among the most discretionary big-budget items for middle class Americans. The strength of the consumer was echoed by Amazon.com which said it was hiring 20 per cent more temporary workers for its warehouses to fill orders for the holiday season.
This week, a cavalcade of earnings from companies ranging from fast-growing streaming service Netflix to cellphone carrier Verizon and from industrial conglomerate General Electric to software maker Microsoft will be among the biggest influences on the stock market.
The big shock last week was the reported drop in Chinese exports.
"That really was not so much about China. . .that was interpreted as a commentary on global growth," said Quincy Krosby, market strategist at Prudential Financial.
Another crisis that has the potential to cause flare-ups of volatility is the ongoing Brexit saga. Last week saw Brexit hit home for the first time, as Tesco's, one of the largest supermarket chains in the United Kingdom, temporarily cleared its shelves of Marmite, a popular sandwich spread. Unilever, which makes Marmite and a host of other consumer products for Tesco and others, had pushed for a slate of price increases to compensate for the lower value of earnings in sterling. Tesco pushed back by pulling Marmite and other products from its shelves and its website.
The value of sterling has fallen to the lowest level in history against a basket of currencies, adjusted for trade. Sterling at US$1.22 for the first time since the 1980s may help manufacturers in the UK compete globally on prices, but it also sets the table for an inflation spiral, as illustrated by the Marmite Wars. The outrage on British social media over the jars of vegetable extract would be nothing compared to the response a spike in petrol or milk prices could cause.
For sectors such as health care, the biggest variable remains the outlook for the November elections. After a cartoonish series of scandals, Donald Trump looks almost certain to lose to Hillary Clinton. What Mrs Clinton called his "exploding" campaign has caused collateral damage for Republicans running for the House and Senate. Were the balance of power to change in these houses of Congress, both currently controlled by Republicans, it could have a more profound effect on the stock market than the identity of the next president.
"With three weeks left until the US Presidential election, politics continue to trump policy and this persists as the key theme of our current trading views," said foreign-exchange analysts at Bank of America Merrill Lynch, in a note to clients.
Meanwhile, traders continue to send markets hither and thither based on their readings of tea leaves for the next Federal Reserve meeting. The disappointing data in China was read as making a hike this year slightly less likely. Still, odds on Fed Funds futures markets for a hike in December are still greater than 50 per cent.
"Next week, there's a clutch of housing market that becomes important because we need to see the housing market continue to do well and also create jobs," said Ms Krosby. Recent falls in mortgage applications suggest that the housing rebound, one of the most successful elements of the Fed's programme to stimulate growth with interest rates, may wane once the Fed's support is removed.
Analysts at brokerage Barclays warn that another source of support for the bull market in stocks - the "financial engineering" that has led to a record wave of buybacks and dividend increases - could also give way if rates begin to rise much further.
All this means that the bar is set much higher for companies in the earnings season this year, said Ms Krosby.