And so history repeats itself ... and repeats ... and repeats.  And always repeating the mistakes.  So last Wednesday the head of the New York Fed said there would likely be no rate hike in September, only to be contradicted by the Fed Vice Chair on Friday who said there might be.  On Saturday, the Vice Chair expanded on this statement with his opinion that inflation would likely rebound to where the Fed would like, thereby opening the door to a gradual hike.  Of course, the Fed has been on record for quite some time that this was a major policy objective, but no where in any of these statements has a specific time frame been stated.  Wall Street has always assumed a hike would come in December, something that investors are prepared for.  But every time something good happens with the economy and the Fed gives even a hint that things are going in a positive direction, Wall Street assumes that the rate hike will happen in September.

This is despite the fact, as I've written many times before, that the Fed has rarely if ever pulled big surprises.  Something like a rate hike would almost certainly be announced with a couple of months notice.  But this does not stop investors from assuming the worst and panicking.  That's what happened today.  Saturday's comments were interpreted that a September rate hike was once again a distinct possibility and the Dow plunged 115 points.  Oddly enough, the markets were humming along very steadily all day, down only 40 points as late as 3:45 p.m.  Then, in the last 15 minutes, another sell off caused the Dow to close 115 points down.  This will likely continue until two things happen -- Shanghai levels off and the Fed makes a definite announcement.  As far as I'm concerned (and I'm sure many economists share this sentiment) ... the sooner the better.  The rate hikes are not the threat.  It's the fear of the hike that's gotten everything topsy-turvy.  Everyone is convinced (irrationally I might add) that the markets will collapse as soon as interest rates go up.  This is patently ridiculous since interest rates have been up for most of our history.  But not until they do go up, and investors can see that no disaster is upon them, will we see this end.  As I said, the sooner the better.  At 7.8 billion, volume was in line with August averages but below the craziness of the last couple weeks that gave us a 10.7 billion average.

Markets | Mon Aug 31, 2015 5:03pm EDT

Wall Street's worst month in 3 years ends on a sour note

By Noel Randewich

DJ:    16,528.03  -114.98       NAS:  4,776.51  -51.82         S&P:  1,972.18  -16.69

Aug 31 (Reuters) - Wall Street ended lower on Monday and wrapped up its worst month since 2012 after comments from a senior Federal Reserve official heightened fears among investors of a potential U.S. interest hike in September.

Fed Vice Chairman Stanley Fischer on Saturday said U.S. inflation would likely rebound as pressure from the dollar fades, allowing the Fed to raise interest rates gradually.

Many analysts took Fischer's comments as a sign the Fed would raise rates in September, instead of December. That shook investors who were already jumpy after weeks of turbulence caused by concerns about a stumbling Chinese economy.

"What you see in the market today is caused by Fischer's comments over the weekend. If they move in September, it's going to cast a lot of doubt about where they will stop," said Stephen Massocca, chief investment officer at Wedbush Equity Management LLC in San Francisco.

Fischer's remarks at the global central banking conference in Jackson Hole, Wyoming suggested the Fed does not see the recent stock market drop and concerns about China as reasons that would keep it from raising rates.

A decade of near-zero interest rates has helped the U.S. stock market stage a spectacular bull run since the financial crisis and investors are worried those gains many end once rates start to climb.

The CBOE Volatility index, known as Wall Street's "fear gauge," rose about 9.14 percent to 28.43, above its long-term average of 20. It spiked to as high as 53.29 last week.

Investors will keep a sharp eye on the Labor Department's monthly jobs report on Friday, which will be the last one before the Fed meets on Sept. 16-17.

"We can still expect to see some significant drops in the market until we get some direction from the Fed regarding a rate increase," said John DeClue, chief investment officer of U.S. Bank Wealth Management.

The Dow Jones industrial average lost 0.69 percent to end at 16,528.03 points and the S&P500 fell 0.84 percent to 1,972.18.  The Nasdaq Composite dropped 1.07 percent to 4,776.51. 

Nine of the 10 major S&P sectors were lower with the health index's 1.85 percent fall leading the decliners.  The S&P energy index rose 1.05 percent and was on track for its best four-day gain in seven years, boosted by ConocoPhillips and Phillips 66.

Crude oil prices jumped after data indicated surprise cuts to U.S. oil production and as OPEC said it was ready to talk to other producers about the recent drop in prices.

In August, the S&P lost 6.3 percent, the Dow fell 6.6 percent and the Nasdaq declined 6.9 percent.

On Monday, Celgene fell 4.80 percent, weighing the most on the S&P 500.

Phillips 66 rose 2.38 percent after Warren Buffett's Berkshire Hathaway disclosed a $4.48 billion stake in the oil refiner.

Declining issues outnumbered advancers on the NYSE by 1,724 to 1,339. On the Nasdaq, 1,432 issues fell and 1,380 advanced.

The S&P 500 index showed one new 52-week high and two new lows, while the Nasdaqrecorded 24 new highs and 22 new lows.

Volume was lighter than in recent days. About 7.8 billion shares traded on U.S. exchanges, compared to an average of 10.7 billion in the past five sessions, according to BATS GlobalMarkets. (Additional reporting by Tanya Agrawal; Editing by Meredith Mazzilli and Chizu Nomiyama)