'Incredibly fearful' Fed braces for jobs report

How the Fed rate hike affects the stock market

Data-dependent Federal Reserve officials suddenly are finding the data turning against them.

A year that was supposed to provide the Fed with plenty of ammunition to justify a rate increase has fallen considerably short. Economic growth remains mired, inflation increasingly has become a bygone remnant of years past and industrial activity is nearing contraction levels.

Moreover, the stock market is tumbling, investors' nerves are frayed and a government shutdown, narrowly averted for October, looks increasingly probable in December, right around the time the U.S. central bank gets its final opportunity to start normalizing interest rates.

On top of it, corporate America has seen a few high-profile episodes of mass layoffs, which spiked in September thanks to Hewlett-Packard jettisoning 32,500 workers. Analysts expect companies to post a 4 percent decline in third-quarter profits, which will be lucky to break even for the year.

This is the environment into which the Fed is looking to raise rates.

Market participants are growing increasingly skeptical that a hike is coming anytime soon.