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Traders Confused: Is the Jobs Market Improving or Not?

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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.

So which is it? To add to the confusion, we got the Fed's Beige Book today, and Fed officials sounded a bit more optimistic about the economy, noting gains in autos sales, real estate,and bank lending, and also noting hiring gains in several districts.

It's true that if the job growth does not materialize as the Fed envisions, they can simply continue their program of buying bonds...or even increase it. But the enthusiasm with which some Fed officials are pushing the tapering talk is causing some alarm...the Dallas Fed's Richard Fisher even went as far to say that the 30-year rally in bonds was over. Strong words.

If that wasn't enough to worry about, the markets are again being held hostage to the trade. After weakening for almost seven straight months, the yen has been strengthening the past two weeks, and did so again today.

This is a problem for the yen carry trade, as it is called. Traders borrow cheap yen, then use it to buy assets (stocks, bonds, etc.) in other countries. This works great, as long as a) borrowing costs in Japan remain low, and b) the yen is weak. But recently borrowing costs have risen, and the yen has strengthened, causing some to begin unwinding this trade.

That's bad news: not only is a weak yen important for those in the yen carry trade, it's also important for the Japanese stock market, since it makes Japanese companies more competitive abroad.

By CNBC's Bob Pisani