An early rally was snuffed out this morning, and while that’s not news, the fact it came in reaction to yet another sobering economic data point, is worrisome.   It was not the odd coupling with oil which has driven equity direction, but the latest report on the health of the service economy.    The ISM service report released at 10:00am came in at a headline read of 53.8 from 55.8 in December.   It was the slowest pace of growth in 23 years.

The speed of deceleration is unnerving, but internals raise even more red flags.

ISM Non-Manufacturing

Employment is slipping at an alarming rate:

• Jan 52.1
• Dec 56.3
• Oct 58.0

New Orders also in freefall:

• Jan 56.5
• Dec 58.9
• Oct 60.8

Prices Paid scream deflation which I’m told is the exact opposite of what the Fed is trying to achieve:

• Jan 46.4
• Dec 51.0

We’ll see what the jobs report looks like on Friday, but even if its “good,” I think the Fed will have to find a way to further backtrack on its rate hike intentions and reiterate data-depended means data-depended.