If August was bad for stocks, September may be worse

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Traders close the books Friday on the worst month for the Dow and S&P 500 in more than a year, and are likely to be cautious ahead of the long Labor Day weekend.

"The end of the month day before a three-day weekend ordinarily has a 70 percent upward bias, so it's going to be a little tough with Syria hanging over us," said Art Cashin, director of floor operations at UBS.

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Stocks were higher Thursday, as some of the tensions surrounding Syria eased and the timing of a U.S. led attack, which looked imminent earlier in the week, seemed to slide. For the month, the Dow fell 4.2 percent to 14,840, and the S&P 500 was off 2.8 percent at 1638, the worst month for those indices since May, 2012.

"At this point, most traders I feel are going into the weekend somewhat flat. No need to be a hero," notes Scott Redler of T3Live.com.

Oil was lower Thursday, after running up this week on concerns that a U.S. action against Syria could lead to retaliation that would hurt oil supplies. Late in the day Thursday, the British parliament rejected a motion supporting military action in Syria, and in the U.S., national security officials were briefing members of Congress in the early evening. Any action against Syria, which the Obama Administration says used chemical weapons on its citizens, looked like it would be after United Nations investigators report back their findings, after leaving Syria Saturday.

(Read more: Syria conflict and the oil market: Worst and best scenarios)

Even though it may be quiet in markets Friday, anxiety has been building ahead of September, historically the worst month for stocks. This September will be especially difficult to navigate with the monthly employment report next week and the Fed's decision whether to taper its bond buying or not, expected Sept. 18. Syria has entered the picture as another potential negative in just the last week.

"That's what's roiling the market now, both pro and con," said Milton Ezrati, market strategist and senior economist at Lord Abbett. "If the Syrian situation looks like it's calm, and nobody's going to act in any violent way…then it will be quiet" ahead of the long weekend.

"They will be taking a wait and see attitude. If the president can find a channel where he doesn't look like he's dithering, or inviting war, that could make the market scream higher," Ezrati said.

Redler said the market is lacking the normal dip buyers, who have been stepping into every shallow correction. "We put a pivot low in at (S&P) 1627. Some active guys will trade long against that. But if we get a break and close below that, the bears will be growling for the 200-day and a retest of the June lows which stand at 1560ish," Redler noted.

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There is some data Friday, including personal and spending income at 8:30 a.m. ET, Chicago PMI at 9:45 a.m. and consumer sentiment, at 9:55 a.m. St. Louis Fed President James Bullard speaks on the economy at 9 a.m.

The British vote hurts President Obama's efforts to build a coalition, and U.K. Prime Minister David Cameron said he would not override it.

"Now crude is down another 70 cents" in late session trading, said Andrew Lipow, president of Lipow Oil Associates. "That really does have to be a surprise. You bring something to a vote and you lose."

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Analysts have said the increase of production in U.S. oil has helped cap some of oil's gains on Mideast tensions. West Texas Intermediate kept trading lower, falling below $107 per barrel Thursday evening. Government data this week put U.S. production at 7.5 million barrels a day last week, a two-decade high.

Lipow said new statistics show that U.S. oil production is growing so much that even the state of Texas' output surpassed that of Iran, which has cut back production and is being sanctioned for its nuclear program. He said Texas output in June was 2.575 million barrels, and Iran's output for July was 2.56 million barrels. Iran's exports have been severely limited by the sanctions.

—By CNBC's Patti Domm. Follow here on Twitter @pattidomm.