Economic news was somewhat mixed this week. There is no question that the manufacturing sector remains in the dumps. If the Federal Reserve were focused only on the manufacturing sector - which makes up less than 20 percent of the U.S. economy - they would certainly be inclined to ease aggressively in the next few months.

The consumer sector is not so anemic. Even if one were to question whether the consumer confidence improvement in March was real, the pace of home sales and consumer spending is not indicative of sharp weakness. Home sales have held rather steady over a period of time when most economists were predicting softer sales. Consumer spending has moderated in the past several months, but consumers continue to spend more and save less, a vote of confidence in their economic prospects.

The Fed needs to weigh all the evidence, not just look at one sector in the economy. The manufacturing recession, for instance, could spill over into the service economy. Historically, a level below 43.5 percent on the NAPM survey signals a contracting economy, not just a declining manufacturing sector. The NAPM survey's diffusion index has held below this marker for two months in a row now.

Market players will look to get a better indication of the Fed's easing potential with the NAPM survey on Monday and the employment situation on Friday. Both series will play important roles in the Fed's decision-making.