Fed speakers, retail sales, inflation data and big chain store earnings are all expected in the week ahead, but it's geopolitical events that could keep markets volatile—particularly when it comes to Russia.
Stocks soared Friday in a low-volume session, after an Interfax report that Russia was ending its military exercises near the Ukraine border. The more than 1.1 percent move Friday in the Dow and S&P 500 was the best one-day move in five months, and it erased the week's losses.
Stocks were on a roller coaster in the past week as traders reacted to headlines on the world's hot spots, as well as economic data that mostly showed an improving U.S. economy but an increasingly weaker Europe.
European GDP and German GDP Thursday could also create some waves, particularly if it is weaker than expected. Italy in the past week fell into a recession and weak German factory data raised concerns that Russian sanctions are hurting the biggest economy in the eurozone.
"The talk is going to be what's going on in Russia, what the Fed's going to do and how quickly, and also you're going to have a lot of noise about the (mid-term congressional) election, starting about now," said Stuart Freeman, chief U.S. equity strategist at Wells Fargo Advisors. "I think those are going to be the volatility factors. However, I think the growth path of the U.S. is on pretty good footing. The jobs data and inflation data, particularly inflation data are the ones we're going to see people watching."
While the U.S. airstrikes on Sunni radicals in Iraq got traders' attention, the bigger question in markets is what Russia is planning for Ukraine.
"The question is will Putin double down or back down," said Marc Chandler, chief currency strategist at Brown Brothers Harriman.
Despite the market's relief rally Friday, traders will be looking for proof that the tensions between Russia and Ukraine could be easing. By Friday, traders had bet the odds of an invasion were increasing, but headlines from the Russian Defense Ministry allayed that concern, for the moment.
"It's a psychological issue as much as it is anything right now," Freeman said. "I think the markets understand that something more could happen there. Europe corrected more than our market…I still think you could see more correction there and uncertainty." But Freeman expects any impact to be short-lived and he expects U.S. stocks to end the year higher.
The recent washout in stocks sent the S&P 500 down more than 4 percent by Thursday from its July 24 intraday high, but Friday's rally leaves it 3 percent off the high. Bank of America Merrill Lynch analysts expect just a single digit pullback, in line with the types of sell offs the market has seen in the last three years.
"Sentiment indicators suggest this is a 4-8 percent type of global equity correction rather than The Big One; we expect 1,862 on SPX to hold," they wrote in a note.
The S&P 500, finishing Friday up 22 points at 1,931, broke down below its 100-day moving average at 1,913 Thursday.
The German DAX in the past week entered correction territory, down more than 10 percent from its June 30 high, and France's CAC temporarily fell to a 10 percent loss on an intraday basis Friday. Portugal, Greece, Italy, and Spain are all down double digits. Traders have been watching the German market as a kind of warning sign for U.S. stocks, so the German ZEW, a reading of economic sentiment, will be of interest Tuesday.
The bond market will also be a source of interest in the week ahead, after yields moved to 13 month lows. Investors sought safety in the U.S. 10-year, which also tracked the German bund. The 10-year bond yield reached an all-time low of 1.01 percent. The U.S. 10-year was at 2.42 percent late Friday, well above the lows it reached early Friday.
In the coming week, there are also $67 billion in Treasury auctions of 3-year, 10-year and 30-year bonds, Tuesday through Thursday.
David Ader, chief Treasury strategist at CRT Capital, said the bond market will focus on speeches from Fed Vice Chairman Stanley Fischer Monday and New York Fed President William Dudley to see if they advance the discussion on rate hikes or address the situation in Ukraine or elsewhere. Fischer speaks in Stockholm on recovering from the Great Recession. New York Fed President William Dudley speaks at a conference on wholesale funding in New York Wednesday, as does Boston Fed President Eric Rosengren.
Retail sales will also be important Wednesday. "I think that could prove a little bit underwhelming," he said. Based on recent credit data, the number may not disappoint. "The strength came from student loans and auto loans but not revolving credit, credit cards. I wonder if that doesn't translate to retail sales, that are muddling or even disappointing."
What to Watch:
Earnings: Bob Evans, Fossil, JDS Uniphase, Valspar, Flowers Foods, Rackspace, Cree
7:00 a.m.: NFIB small business survey
10:00 a.m.: JOLTs
1:00 p.m.: $26 billion 3-year note auction
2:00 p.m.: Budget
Earnings: Deere, Macy's, Cisco, SeaWorld, NetApp, Noodles, Surgical Care Affiliates, Iamgold
7:00 a.m.: Mortgage applications
8:30 a.m.: Retail sales
0905 a.m.: New York Fed President William Dudley
9:20 a.m.: Boston Fed President Eric Rosengren
10:00 a.m.: Business inventories
1:00 p.m.: $24 billion 10-year note auction
Earnings: Wal-Mart, Nordstrom, JC Penney, Kohl's, Red Robin Gourmet, Advance Auto Parts, Agilent
8:30 a.m.: Jobless claims
8:30 a.m.: Import prices
1:00 p.m.: $16 billion 30-year bond auction
Earnings: Estee Lauder
8:30 a.m.: PPI
8:30 a.m.: Empire manufacturing survey
9:00 a.m.: TIC data
9:15 a.m.: Industrial production
9:15 a.m.: Capacity utilization
9:55 a.m.: University of Michigan consumer sentiment
This article originally appeared in CNBC.
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