Jobs report delay leaves a void
With no jobs report to trade on, markets instead will bounce off the words of the politicians responsible for shutting down the Labor Department that issues the monthly number.
Friday is day four of markets being held hostage by Washington, as Congress and the White House spar over the spending needed to reopen the government - and the debt ceiling. The government shutdown has resulted in a dearth of economic releases, with everything but the weekly jobless claims release unavailable.
(Read more: Stocks grapple with triple witching of lousy news)
Many traders and analysts were skeptical that the political impasse would come to a government shutdown. But now that it has, trading was jittery Thursday as speculation circulated that the U.S. could now face a worst case scenario, where Congress fails to address the debt ceiling and the country defaults. A jarring warning from Treasury predicting a catastrophic outcome if that happens added to the nervousness Thursday morning.
"We had the Treasury saying it would be an apocalyptic event. Then we had (House Speaker John) Boehner say: 'I'm not going to let it happen.' I think investors were pulled and tugged today between extreme rhetoric," said Jack Ablin, CIO at BMO Private Bank.
The market recovered some of its losses around midday Thursday when Boehner was reported to have told Republicans that he is determined to prevent a default and is willing to pass a measure through a combination of GOP and Democratic votes if need be. But then stocks dipped again on reports the Capitol Building was under lockdown due to a shooting event, and there was little information available initially. It later was reported that police shot a woman who tried to ram a car into a White House gate and then drove to the Capitol.
Stocks finished lower, with the S&P 500 down 15 at 1678, and the Dow off 136 at 14,996. Short-term Treasury yields rose on concerns about the debt ceiling. The yield on the one-month T-bill reached 0.17 percent, its highest level since November.
Friday could see a ripple of excitement from Twitter's $1 billion IPO filing, which came out Thursday after the bell. IPOs are seeing a resurgence, with 160 deals through the third quarter, compared to 142 for all of last year, according to PricewaterhouseCoopers' IPO Watch.
PwC expects the momentum to continue and the year should see the highest level of IPO activity since 2007.
What to Watch?
The lack of a jobs report leaves a question mark for traders, who were looking forward to the employment report as another piece of information to help them handicap possible Fed action on its bond buying program. The Fed in September held back from tapering its $85 billion monthly bond purchases, because of concerns about financial conditions, the economy and fiscal uncertainty.
"It's typically a big number. It's going to be a pretty big non-event, and it's not just the jobs number. About a third of all data that investors track comes from affected government agencies," said Ablin. "Probably the short-term guys are going to watch from the sidelines. There's nothing to sink your teeth into so anything you do is just guess work."
"We're just left to blow in the wind," said John Briggs, head of cross asset strategy at RBS. "The market will probably be choppy."
(Read more: First a default, then a depression? Some think so)
Barry Knapp, head of equity portfolio strategy at Barclays Capital, said the market will start to focus on earnings next week, even with the showdown in Washington. Former Dow component Alcoa reports Tuesday, and J.P. Morgan will be the first Dow member to report earnings with its report Friday.
"The market will be a little squishy between now and the beginning of earnings season," Knapp said. "The market performance for the two weeks following Alcoa's earnings report has averaged up 1.3 percent since the recession…It's been a pretty favorable period."
Knapp said the feuding in Washington is not likely to end with the U.S. breaching the debt ceiling. "By mid-week next week, if the polls aren't pointing to a victory for one side or another, they'll start negotiating," he said. He said a deal would probably be positive for stocks.
The markets Friday may be sniffing out a possible weekend surprise though the odds don't seem high.
"It's not like you're going into the weekend risk and you're afraid. If we walk in on Monday, and nothing's changed, that's kind of expected. I don't think things are going to rally, but I just don't think you're going to have a typical 'risk off' into the weekend," Briggs said. "The weekend risk could actually be good news."
(Read more: Wall Street wonders if Obama wants a selloff)
There will be a group of Fed speakers to watch Friday. Fed Gov. Jeremy Stein speaks at 9:30 at the New York Fed on fire sales and securities financing transactions. New York Fed President William Dudley speaks at the same event.
Minneapolis Fed President Narayana Kocherlakota speaks at 1:45 p.m. on monetary policy in Bloomington, Minn. Other Fed speakers include Richmond Fed President Jeffrey Lacker, who speaks at a financial literacy conference and Dallas Fed President Richard Fisher who speaks to the Risk Management Association Central Arkansas Chapter.
—By CNBC's Patti Domm. Follow here on Twitter @pattidomm.