It was another day of trouncing with investors not knowing what the hell to do so they did everything.  First there was a tremendous sell off and this was followed mid-afternoon by a tremendous rally only to be followed in the last half hour by another big sell off leaving the Dow down another big drop of 272 points.  Yesterday everyone was betting on a strong labor report and they didn't get it.  Not bad, but at 173,000 new jobs, not quite as good as the 220,000 that were forecast.  Unemployment also dropped to 5.1%, the lowest in 7 years, all of which should have been taken as good news, which was probably the trigger for the big afternoon rally.

But with all the mixed indicators out there, the market is still stumped about what the Fed is going to do this month about interest rates.  Thus, the day's trading was somewhat schizophrenic.  The good news is that the naysayers who believe there will be a rate hike this month have dropped from 30% yesterday to 20% today and the exceedingly light volume of 6.3 billion means that most of the real decision makers are still on vacation.  The Fed has stated repeatedly that their unemployment target is 5% and will not raise rates until then.  That should be a source of some comfort today since we're still not quite there.  As I have written repeatedly on this blog, the Fed is not known for sudden dumps so I don't see them giving the market only a week's notice on a rate hike.  It's far more likely that they will announce in October that the first interest rate hike will be coming in December.  That's just my opinion from years of observation and, though there are lots of very smart people out there who agree with this view, there are also some very smart people who disagree.  I can't wait to find out which one of us is right.

Markets | Fri Sep 4, 2015 6:12pm EDT

Wall Street caps off tough week with a steep loss

BY NOEL RANDEWICH

DJ:  16,102.38  -272.38       NAS:  4,683.92  -49.58        S&P:  1,921.22  -29.91

REUTERS/LUCAS JACKSON

U.S. stock indexes dropped more than 1 percent on Friday after a mixed August jobs report did little to quell investor uncertainty about whether the Federal Reserve will increase interest rates this month.

Trepidation about the first U.S. rate hike in almost a decade added to worries among investors already on edge about a stumbling Chinese economy and a recent market selloff.

"Markets are confused. It was an okay jobs report, but there's worry about China going into the weekend," said John Augustine, chief investment officer, Huntington Trust in Columbus, Ohio.

Nonfarm payrolls increased 173,000 last month, fewer than the 220,000 that economists polled by Reuters had expected. But the unemployment rate dropped to 5.1 percent, its lowest in more than seven years, and wages accelerated. Many investors viewed those data points as contradictory signals about the urgency to increase interest rates.

Near-zero rates have allowed the U.S. stock market to almost triple from the depths of the financial crisis in 2009. Many on Wall Street hope recent global market turmoil and worries about China's economy will lead the Fed to hold off raising rates when it meets on Sept. 16-17.

"In the run-up to its policy meeting, the Fed will pay even greater attention to global market developments – this with a view to minimizing the risk that its words and actions would inadvertently add to market volatility that could spill over into a fragile global economy and weaken it further," said Mohamed El-Erian, chief economic adviser at Allianz.

Following Friday's employment data, futures market traders predicted about a 20 percent chance a rate hike will come this month, down from around 30 percent before the jobs report and from a more than 50 percent probability before world markets started tumbling two weeks ago.

The Dow Jones industrial average .DJI ended down 1.66 percent at 16,102.38 points and the S&P 500 .SPX lost 1.53 percent to close at 1,921.23.  The Nasdaq Composite .IXIC gave up 1.05 percent to 4,683.92.

Microsoft (MSFT.O) was the biggest drag on the S&P and the Nasdaq with a 2.05 percent fall.

All the 10 major S&P sectors were sharply lower with the financial index's .SPSY 2.03 percent loss leading the decliners. Wells Fargo (WFC.N) dropped 2.17 percent and JPMorgan (JPM.N) lost 1.88 percent.

In a minor sign of improved sentiment heading into the weekend, all three major indices moved up from lows of around 2 percent in the latter part of the session. But they still ended the week in the red, with the Dow down 3.2 percent, the S&P off 3.4 percent and the Nasdaqfalling 3 percent.

Chinese stock markets, ground zero for the recent global selloff, were closed on Thursday and Friday for the 70th anniversary of World War II. U.S. stock markets will be closed for labor day on Monday when Chinese markets reopen.

The CBOE Volatility index .VIX, known as Wall Street's "fear gauge", rose 7 percent to 27.41, well above its long-term average of 20.

Caterpillar's (CAT.N) shares lost 1.81 percent after Baird downgraded the stock to "neutral".

Netflix (NFLX.O) fell 2.24 percent in its sixth straight day of losses.

Stock losses have pushed the S&P 500's valuation down to a relatively more attractive 15.4 times expected earnings, compared to around 17 for much of 2015, according to Thomson Reuters StarMine data.

But the outlook for earnings may darken due to concerns stemming from China. Wall Street already expects a 3.4 percent decline in earnings for the S&P 500 this quarter.

Declining issues outnumbered advancing ones on the NYSE by 2,306 to 718. On the Nasdaq, 1,747 issues fell and 1,034 advanced.

The S&P 500 index showed no new 52-week highs and 16 new lows, while the Nasdaqrecorded 11 new highs and 65 new lows.

Volume was light. About 6.3 billion shares traded on U.S. exchanges, compared to an average of 7.9 billion in the past five sessions, according to BATS Global Markets.