After an initially exuberant election reaction, stocks may trade more cautiously in the week ahead, as investors watch election developments unfold and track the course of the coronavirus. 

The S&P 500 was up more than 7% in the past week, and the Nasdaq rose nearly 9%. Technology, communications services, health care and discretionary stocks led the rally, after it appeared Democrat Joe Biden could be the next president but with a split Congress.

The election was still unresolved heading into the weekend, but even if Biden is declared winner, close votes and lawsuits are likely to result in recounts. The Senate appeared to be in Republican hands, but the margin of control is likely to be tight, and runoff elections are required for two Senate seats in Georgia in early January.

"I think the uncertainty is going to catch up the market on a short-term basis," said Leo Grohowski, BNY Mellon's Wealth Management chief investment officer. "Perhaps next week could be a drifting lower kind of week."

Ahead of the election, the market had been betting on a "blue wave," where Biden would take the White House and Democrats would get control of the Senate, giving them total control of Congress. But when it appeared the Senate would stay in Republican hands, stocks surged on the idea of gridlock, which would keep Biden from implementing tax increases and lots of new regulations.

At the same time, there has been a surge in daily new coronavirus cases to more than 122,000. Economists are concerned that the economic recovery could suffer as some states could restrict activities and consumers may pull back heading into the important holiday season.

The Fed, in its post-meeting statement Thursday, repeated that the course of the virus could help determine the path of the economy.

There are a few economic reports in the week ahead, including consumer price index inflation data Thursday and the producer price index Friday. More than a dozen Fed officials are on the speaking circuit, including Fed Chairman Jerome Powell, who speaks Thursday on central banking at a European Central Bank forum.

The earnings season is beginning to slow down, but there are still dozens of reports, including from McDonald's on Monday and Walt Disney, Applied Materials and Cisco on Thursday.

"I think next week is just setting up to be a breather. There's still a lot to figure out here," said Grohowski. "The equity market's reaction has been I think understandable and probably better than many might have expected."

Grohowski said there may be uncertainty for awhile. "What I'm thinking about is the Senate races. Part of the market reaction has been relying on this divided government." After the votes are all in or recounted, "a sweep is unlikely but possible."

"I think the longer this stays uncertain and messy, the more the post-election bounce comes into question," he said.

It would not be unusual for the stock market to sell off before rallying into year end, according to Sam Stovall, chief investment strategist at CFRA. Stovall does not expect the type of turbulence there was in 2000, when former Vice President Al Gore lost to George W. Bush in a tight race that ultimately went to the Supreme Court.

"In 2000, they were not expecting hanging chads. But they do expect a contested election this time. I think in many ways the market anticipated this," said Stovall.

But the market, after its election week surge, could pull back. "Historically, the market goes down in the month of November, after a Democratic victory," said Stovall. Since World War II, Democrats won the White House nine times, and the market fell an average of 0.5% in November in those years, compared to the average gain for all Novembers of 1.4%, he said.

After those Democratic victories, stocks then rose 1.9% in December on average, more than the normal 1.5% gain for all Decembers.

Strategists said they currently do not expect the kind of lockdowns that states ordered when the pandemic started to spread in March. But there could still be some impact that could be negative for stocks.

Grohowski said he sees some signs of optimism for the market. Strong data, like third quarter GDP, October's drop in unemployment to 6.9%, and the better-than-expected earnings are all positives for the market. Another is that investors are so skeptical.

"What does still exist is a great deal of dry powder. There's $4.3 trillion in money markets alone," he said. "I can tell you, being in touch with investors of all shapes and sizes this week, there's still a lot of skepticism. From a contrarian view, high cash and a lot of skepticism is a contrarian indicator."

Week ahead calendar

Monday 

Earnings: McDonald's, SoftBank, Beyond Meat, Simon Property Group, Ambac Financial, Tilray, ZoomInfo, Occidental Petroleum, Myriad Genetics, Taubman Centers, International Flavors and Fragrances, Norwegian Cruise, Canopy Growth, Aurora Cannabis, Party City 

1:30 p.m. Cleveland Fed President Loretta Mester

5:00 p.m. Dallas Fed President Robert Kaplan

2:00 p.m. Senior loan officer survey 

Tuesday 

Earnings: Lyft, Advance Auto Parts, Adidas, D.R. Horton, Rockwell Automation, CyberArk Software, Hain Celestial, Rackspace, Ashland, Rocket Cos 

6:00 a.m. NFIB small business survey

8:30 a.m. Dallas Fed's Kaplan

10:00 a.m. JOLTS

10:00 a.m. Dallas Fed's Kaplan

10:00 a.m. Boston Fed President Eric Rosengren 

12:00 p.m. Dallas Fed's Kaplan

2:00 p.m. Fe Vice Chairman Randal Quarles

5:00 p.m. Fed Governor Lael Brainard

Wednesday

Veterans Day

Bond market closed, stocks market open regular trading hours 

Earnings: Air Products, DouYu, Lemonade, Reynolds Consumer, Vroom, Fossil 

Thursday 

Earnings: Walt Disney, Palantir Technologies, Applied Materials, Beazer Homes, Cisco Systems, Siemens, Burberry, Brookfield Asset Management, Unity Software

8:30 a.m. Jobless claims

8:30 a.m. CPI

9:30 a.m. Fed Chairman Jerome Powell at ECB forum on central banking

1:00 p.m. Chicago Fed President Charles Evans

2:00 p.m. Federal budget

2:00 p.m. New York Fed President John Williams 

Friday 

Earnings: Manchester United, Draftkings, Vipshop

 7:00 a.m. New York Fed's Williams

8:30 a.m. St. Louis Fed President James Bullard

8:30 a.m. PPI

10:00 a.m. Consumer sentiment