Wall Street will welcome the fourth quarter with a rush of new data, most notably the jobs report for September that will be released at the end of the week.
Each new piece of economic data has gained outsized significance in determining how likely the Federal Reserve will move on interest rates by year's end. The jobs report, normally the most important piece of data in any month, has gained even more importance as one of the two pillars on which the Fed bases monetary policy.
Economists anticipate roughly 170,000 jobs to have been added to the U.S. economy in September, strong enough to signal a robust labor market. The unemployment rate is expected to remain unchanged at 4.9%.
"We see few surprises that would derail the Fed's assessment of the labor market," said BNP Paribas analysts. "We expect the September report to confirm the Fed's view that the labor market is on solid footing and maintain our base-case scenario of a December rate hike."
A rate hike in December currently has a 56% likelihood, according to CME Group fed funds futures. Chances of a year-end hike increased after the Federal Open Market Committee punted on a September rise and said the case for a hike has strengthened.
Fed speak will continue to be on watch in the coming week as investors parse comments for clues as to the rate hike timeline. Richmond Fed President Jeffrey Lacker will outline his economic outlook, and Chicago Fed President Charles Evans will participate in a Q&A on Tuesday; Minneapolis Fed President Neel Kashkari will speak on Wednesday; and Fed Vice Chair Stanley Fischer, Cleveland Fed President Loretta Mester, Kansas City Fed President Esther George, and Fed Gov. Lael Brainard will speak on Friday.
The manufacturing sector will go under the microscope in the coming week with the ISM Manufacturing Index for September, and construction spending for August out on Monday. International trade for August, and factory orders for August will be released on Wednesday.
Elsewhere on the economic calendar in the coming week, motor vehicle sales for September will trickle out over Monday's session; and the ADP National Employment Report, which measures private payrolls, and the ISM Non-Manufacturing Index for September will come on Wednesday.
As for the rest of the fourth quarter, historical averages indicate benchmark indexes will come away with gains -- the S&P 500 has notched gains in the fourth quarter more than two-thirds of the time since 1945. But headwinds including that potential December hike have undermined some of the confidence heading into the final three months of the year.
"Initial expectations for a fifth-consecutive decline in S&P 500 operating EPS in [the third quarter], combined with elevated valuations, election uncertainty, and the increasing likelihood of a December rate hike could serve as headwinds, tempering end-of-year optimism," Sam Stovall, U.S. equity strategist at S&P Capital, wrote in a note.
A number of major companies are on the schedule to report earnings before the reporting seasons kicks off in earnest in one week. Darden Restaurants (DRI - Get Report) and Micron Technology (MU - Get Report) will report on Tuesday; Constellation Brands (STZ - Get Report) , Global Payments (GPN - Get Report) , Monsanto (MON) and Yum! Brands (YUM - Get Report) on Wednesday; and Ruby Tuesday (RT) on Thursday.