Caution reigns on Wall Street as November jobs report looms
What is historically one of Wall Street's best months may not live up to that billing this time around.
The first trading session of December got off to a less-than-positive start Monday, with investors bypassing a better-than-expected manufacturing report and mixed indicators on the holiday shopping season to engage in across-the-board selling.
The culprit? Most likely the fact that the S&P 500 is positioned for its best year in a decade, up more than 26 percent in 2013.
(Read more: Get ready for 10 percent drop: Goldman)
"We've had such a strong year," said Ian Kerrigan, an investment specialist at JPMorgan Private Bank. "If the market wants to take a break in December, it's well-deserved."
There's also a reluctance to take major positions before the release of the nonfarm payrolls report Friday, particularly considering its potential impact on U.S. monetary policy.
Wall Street could well have "a buyer's strike, as there is no incentive to put capital at risk, especially with the jobs report," Kerrigan said. "We're cautious. It's hard to chase when you're up 26 percent and up 13 percent the year before."
Given the Federal Reserve's focus on the labor and housing markets, the monthly employment data could be key in whether the central bank chooses to start reducing its $85 billion in monthly asset purchases sooner rather than later.
(Read more: Markets send taper message)
The Institute for Supply Management's gauge of factory activity in November showed another month of expansion and "supports an improving economy and better stock prices," said Dan Greenhaus, chief global strategist at BTIG. "But we still have the December Fed meeting, and if the Fed decides to reduce, that throws a wrench in the works."
The market's reaction to a Fed taper decision is difficult to predict.
"There are some people who think you see a reaction similar to the previous taper tantrum," Greenhaus said, referring to the surge in the 10-year Treasury yield.
"If rates are going up, that's because the economy is getting better," Kerrigan said. "That should warrant stronger equity exposure."
(Read more: 2,014 in 2014 a popular call)
But he acknowledged that whether Wall Street sees it that way is a different story.
Both Greenhaus and Kerrigan view U.S. equities as fairly valued. Kerrigan said stocks are "not at a discount and not overpriced," while Greenhaus called them "fairly and fully valued."
But it's important to remember the market doesn't trade at fair value.
"That's why it's an average," Greenhaus said. "Just because you're above or below doesn't mean it's a buy or a sell."
Kerrigan said, "We're waiting to see more top-line growth before adding new positions, or we'd like to see a pullback of 5 percent to 10 percent, based on what the catalyst is for that pullback, of course."
—By CNBC's Kate Gibson