Traders confused: is the job market improving, or not?

Markets were volatile again today, this time on signs that the jobs market may not be as strong as some hoped. A report on private sector employment by ADP was weaker than expected, as was an employment gauge released as part of a survey of purchasing managers in the services industry.

That is causing some to consider lowering their estimates for Friday's critical May jobs report.

This is confusing, because Fed officials have been talking about tapering their purchases of bonds as the job market improves.

We've had Federal Reserve officials say it's time to consider tapering bond purchases, but we haven't —at least not in my memory — had a Federal Reserve official declaring a rally of anything "over."

Until now.

Another day, another 204-point swing in the Dow. Notice how more volatile the market has become? It's been two weeks since the Fed minutes were released, which revealed a lively discussion on when to taper bond purchases.

The S&P 500 hit an historic intraday high that morning (1687.18), and by the end of the day we were all actively debating whether it was some kind of inflection point in the market.

We don't know if it was an inflection point long term, but short term that has certainly proved to be the case.

That day was the top of the market, so far.

(Read More: Why Bad News Soon May Just Become ... Bad News)

Since then, the S&P is 3.4 percent off its highs, and the Volatility Index (VIX) has gone from 13.05 (the May 22 intraday low) to 16.78—a 28 percent gain.

And interest-rate-sensitive sectors have been hit hard, with the Dow Utilities down 7.1 percent and the price of 10-year Treasurys down 2.1 percent.

Elsewhere, another REIT specializing in single-family houses goes public tonight. Colony American Homes (CAHS), which lease and manages such houses, is seeking to sell 20 million shares at $11.50 to $13.00.

As of April 30, Colony's portfolio consisted of 8,764 wholly owned homes and 1,167 owned in a joint venture, mainly in Arizona, California, Colorado, Delaware, Florida, Georgia, Nevada, Pennsylvania and Texas.

The market has not embraced companies buying and managing blocks of single-family housing. Silver Bay Realty (SBY) went public in December priced at $18.50 and is now $17.86; American Residential (ARPI) was $21 in May and is now $19.20.

General Motors being added to the S&P 500 at the close on June 6th (replacing Heinz ) is more good news for GM, as the stock orbits a two year high in early Wall Street dealings. GM May sales were up 3.1 percent. May light vehicle seasonally adjusted annual rates are now at 15.3 million, well above last year's numbers (13.9 million). and even better than April's 14.9 million.

There was also strong demand for pickup trucks...particularly at Ford, where sales were up 14 percent. It's hard to believe, but pickup trucks are now almost 14 percent of total vehicle sales. Why?

Pickup trucks do well when certain parts of the U.S. economy show improvement: in this case, it's housing/construction, oil and gas. Those groups are big buyers of pickup trucks.

One other point: adding GM will beef up the Consumer Discretionary sector of the S&P 500 Index and reduce the Consumer Staples sector that Heinz was part of.

The NYSE Euronext (NYX) has approved its merger with InterContinentalExchange (ICE), and by a landslide: with about 63 percent of shareholders voting, the approval rate was roughly 99 percent.

ICE shareholders have also approved the merger.

The combined company will have a roughly $20 billion value, with about 116 million shares fully diluted shares.

Home builders are near multi-year highs, rallying two to three percent, as home prices surge on improving demand and limited supply. According to the Case-Shiller Index released this morning, home prices rose 10.9 percent in March versus the same period last year, seeing their best annual gain in nearly seven years.

Housing has been an economic bright spot for the U.S. with home builders, building materials, and home furnishing companies all benefiting from the recovery. The U.S. Home Construction ETF, which includes holdings like PulteGroup and Lowe's, is up 20 percent this year, outperforming the S&P 500, which is up 15 percent.

Bob Pisani is on vacation this week.

Have two Pandora's Boxes been opened? Fed Chairman Ben Bernanke may have opened the first one. No matter that it is highly unlikely economic data will come in showing sufficient strong and sustained growth to justify tapering bond purchases any time soon — markets see it differently.

The bond market is wound so tight that even raising the remote possibility of ending tapering of bond purchases has thrown prices into a tizzy.

Traders chase both sides of Fed debate.

Is this a signature day for the markets? Not clear yet, but a couple data points: 1) heavy volume, 2) spike in volatility, and 3) a key paragraph from the FOMC Minutes:

"A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence would be necessary and the likelihood of that outcome."

Uh-oh...they mentioned a June meeting! It's over! Aargh!

Hold on: "views differed about what evidence would be necessary and the likelihood of that outcome."

They can't even agree on what evidence would be sufficient for them to begin tapering! With the voting members heavily weighted toward doves, does anyone think the Fed is going to taper in June? Anyone? I didn't think so.

In my informal, unscientific surveys of traders, only about 25 percent of the traders I talk to believe the Fed might begin tapering by September; the majority believe they will not do so until 2014.

They could be wrong, but unless we see Nonfarm Payrolls over, say, 250,000 for the next three months, I too think it is unlikely the Fed starts tapering in the next few months.

Instead of asking, "Why did we drop midday?," let me turn this around and ask, "Why did the Dow move up 150 points right after the Bernanke testimony--why were we up in the first place, given that Bernanke was very balanced?"

The answer is, traders are chasing both sides of the story.

The guys who believe the economy is weak--and that the Fed will not move before 2014--point to comments from the Fed minutes like, "Many on FOMC Wanted to Wait for Stronger Data Before Tapering," or "Many on FOMC Said More Progress Needed Before Slowing QE Pace."

Note the phrase, "many."

But many are now trying to position themselves hawkishly and are trying to drag the market in their direction.

Finally, several have asked why the market sold off at 1:00 p.m. ET--an hour before the Fed minutes. Silly theories that "someone knew something" aside (please), news of a police officer being killed--and hacked to death--in London--along with disturbing video of one of the apparent killers with blood-soaked hands--may have been a factor in the markets drop.

Traders overreact to Federal Reserve Chairman Ben Bernanke's comments. Mr. Bernanke, in his Q and A, essentially reiterated what New York Fed President William Dudley said yesterday: that any change in the flow of bond purchases will depend on the incoming data.

A question about whether the Fed might reduce bond purchases before Labor Day elicited the same reply: the Fed could reduce bond purchases in the next few meetings if the data supported it.

But stocks immediately came off their highs, bonds dropped on the comment. This seems to have been interpreted to mean there was some kind of imminent end to purchases was occurring.

Dudley warned yesterday that there was a real risk of the markets overreacting to any talk of tightening. Here is a good example of this.

Dudley also said it will take three or four months before the Fed will know if the economy is strong enough for it to begin tapering its purchases of bonds.

Most traders believe that the chances of June tapering is zero, with only a minority that something will happen in the July 30-31 meeting. Some believe the chances are higher for the September meeting, but most still think the data will likely remain weak and the Fed will not move until 2014.

If you don't think this is hard to parse, consider the two different headlines, this from Barron's: "Bernanke Doesn't Rule Out Fed Taper In the Next Few Months"; and this one at the same time from Reuters: "Bernanke Offers No Hint of Pullback in Fed Stimulus." Finally, this from AP: "Stocks Surge as Bernanke Retains Dovish Tone".

Why is this hysterical parsing happening? Because markets are now so dependent on central bank support, because organic growth is so lackluster, that any hint of premature withdraw of stimulus creates a knee-jerk reaction.

Unfortunately, we're going to have to get used to this. We're all parsing commas now, for every Fed official, into the foreseeable future.