Photo: Drew Angerer/Getty Images

This week will set the table for the fourth quarter in what's been a wild and highly unusual year. The stock market has risen more than 20% in 2019, but that's largely been because of a recovery from December's selloff in the first quarter.

The big picture: "Everybody’s squared up" in anticipation, says Ellis Phifer, market strategist at Raymond James. But this week has the potential for "all hell to break loose."

What's happening: In addition to Friday's all-important U.S. nonfarm payrolls report, investors will digest a massive chunk of earnings reports and hear from three major central banks.

  • 156 S&P 500 companies, including six members of the Dow 30, are scheduled to report third quarter earnings results, FactSet notes.
  • Germany and the U.S. will report important jobs and manufacturing data, with both countries bracing for weak readings.
  • The Fed, the Bank of Canada and the Bank of Japan will each announce policy decisions, with the Fed and BOJ expected to loosen their current policy stances.

Between the lines: If the Fed doesn't cut interest rates or deliver hawkish forward guidance on Wednesday, it will weigh heavily on the market, which sees a 90% likelihood of a cut this month and expects more in 2020.

The intrigue: Investors have a lot of dry powder — data from the Investment Company Institute shows more than $160 billion has been pulled from equity mutual funds and ETFs this year while money market funds, which are effectively savings accounts, have swelled to the highest level since 2009.

  • "The gap between US equity fund flows relative to bond and cash funds during the past 12 months is the widest since 2008," Goldman Sachs research analysts said in a note.

By the numbers: Companies reporting this week are coming in with low expectations.

  • Nine of the S&P's 11 sectors are reporting a year-over-year decline in their net profit margins and the index's forward P/E ratio is currently 17, above both the five- and 10-year averages.
  • However, 80% of companies who have reported earnings so far have beaten estimates.

The bottom line: The stock market has risen on just about any form of good news this year and has rallied after bad news. But, with little faith in the U.S.-China phase 1 trade deal, a new catalyst is needed.

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