Thursday's weekly jobless claims report, showing an unexpected jump to 385,000, the highest level since November, added to the sour tone. That was an increase from last week's 357,000. Some of the increase was blamed on seasonality and the Easter holiday.
"If you do lay the pattern over what we've seen the last couple of years, it started in April and you had this swoon to about October and if anyone was going to draw from that, well there's the pattern. The current data points we've gotten kind of does give evidence that we are that we are seeing some of that," said Mark Luschini, chief investment strategist at Janney Montgomery.
"It's a little early for spring slowdown but that could be part of the point here. There is some very tentative evidence in the data," said Citigroup economist Steven Wieting.
"We will see a repeat of the pattern of the last three years, where winter data is stronger and spring data is weaker. We think that pattern is dissipating and won't be as severe," he said.
Wieting, like other economists, expects growth in the second quarter to slow. His first quarter forecast is for 2.9 percent, and then 1.2 percent for the second quarter.
(Read More: Weekly Jobless Claims Get Weaker as Outlook Dims)
Investors are watching for any indication on the direction of the economy, as well as every word from the Fed on its easing programs, which would end if the economy strengthened for a prolonged period. However, the recent spate of weak reports has balanced talk from some Fed officials that the Fed could consider winding down its asset purchases sooner than expected.
Among the recent economic reports to disappoint was March ISM on services sector job growth, which showed the lowest level in seven months. ISM came in at 54.4, lower than expected and below its six month average of 55.2. Also worrisome was the decline in the employment component in the report to 53.3 from 57.2.
(Read More: Service Sector Growth Weakest in Seven Months: ISM)
Another disappointing report came from ADP, which said the economy added just 158,000 private sector jobs in March, well below the 200,000 expected. The Wednesday reports follow a weaker than expected ISM manufacturing reading on Monday.
(Read More: Job-Seeking Teens Might Get a Break This Summer)
Wieting doesn't expect the economic swoon to be as severe as it was in the last several years. One plus is that housing is now helping the economy and should provide additional jobs. He also expects to see five percent earnings growth in first quarter reports, which start next week. That is well above the consensus for profit growth of less than a percent.
J.P. Morgan chief U.S. economist Michael Feroli said in a note that in part the seasonal slowdown stems from the Great Recession of late 2008 and early 2009. He said the deep decline in economic activity in that that period affected the seasonal adjustment in government data in subsequent years.
"This would imply that in subsequent years the seasonal adjustment partly expects a decline in activity in the winter months, and when that doesn't materialize, will conclude that the seasonally adjusted data are performing well. The opposite pattern should play out in the summer months, when the Great Recession wasn't as severe, thus making subsequent summer data look weak," he wrote in a note.
Feroli said the Great Recession, therefore, has created an "echo effect" on seasonally adjusted data. "This effect is quantitatively quite small and can't explain the degree to which the economy has softened in warmer months over the past three years," he noted, and like Wieting, he sees the echo effect fading with the passing years..
"This effect was very small last year and we believe should be negligible this year. We can't deny the uncanniness of the regularity of the warm weather slowdowns, but are inclined to ascribe it to real economic factors-- such as European developments -- rather than biases in seasonal adjustment," according to Feroli.
(Read More: Work Slowdown? ADP Says Job Creation Slowing)
Economists say a wild card for the economy is fiscal tightening, but he does not see a huge impact from that. The "sequester" or automatic spending cuts amount to about a $40 billion hit to spending this year, but the impact of higher taxes has also yet to be seen. "Everyone is forecasting first half weakness because of fiscal tightening. What's really surprising is how little of it we're seeing," he said.
Stocks were mixed Thursday, pressured by weak data, but supported by a new hefty round of easing by the Bank of Japan. At the same time, markets were tossed by mixed commentary from Fed officials, one of whom raised the idea of tapering off of quantitative easing programs by summer, earlier than anticipated. The Dow fell 111 to 14,550 Wednesday, and the S&P was off 16 at 1553, a day after both hit record highs
(Read More: BOJ Throws In Kitchen Sink in War With Deflation)
As investors sell stocks, they have been rushing into Treasurys, driving the 10-year yield to 1.78 percent. Stocks were also hit Wednesday when the U.S. said it would send a missile defense system to Guam to defend it from North Korea.
"The fact that it seems to have taken on this heightened degree of urgency I think is a little bit startling," said Luschini.
Jack Ablin, CIO of BMO Private Bank, said investors will be monitoring the North Korea situation as well, but as for a swoon, he does not expect much. "Unless sentiment really turns around, I still believe not-withstanding, this kind of puffed up valuation, I still think the market trades higher," he said. Ablin said he sees fair value at 1520 on the S&P and in a sell off, expects the market could seek out that level.
"If investors want to focus on earnings and the economy we could see prices fall back to fair value which isn't that far away…if on the other hand, they'd rather instead focus on cheap financing rates and big valuation differential between stocks and bonds, the market could go higher," he said.