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The Stock Market May Have Been Handed A Harsh Dose Of Reality

The S&P 500 rose by 90 basis points on May 5, to close at 2,868. It wasn’t as great a day as it sounded. The S&P (NYSE:SPY) 500 had been up around 2% at 3 PM, and then the Fed’s Vice Chair Richard Clarida through a dose of reality on the market, and well, a straight line down.

S&P 500 Index

S&P 500 Index

The ISM non-manufacturing report was better than expected at 41.8%, a pretty horrible number. The Atlanta Fed GDP is now forecasting a second-quarter drop in GDP of 17.6%. We still have ADP Private payrolls today, initial claims on Thursday, and the BLS job report on Friday.

Perhaps Clarida gave the market a dose of what it needed, the idea that economic reopening wasn’t going to be a lightswitch flip. He noted it is going to take some time for the labor market to recover. No kidding, it’s going to take some time to recover. It took six years for the labor market to return to 2008 levels. It took three years for the labor market to return to 2001 levels. Those declines were much smaller by comparison. How long will this take?

All Employees - Total Nonfarm

All Employees – Total Nonfarm

It would seem that Monday’s rally may only amount to a be a gap fill from last week’s sell-off. If that proves to be the case, the next move in the index should be lower back to 2,800 and perhaps 2,730.

SP 500 Index

SP 500 Index

Disney (DIS)

Walt Disney Company (NYSE:DIS) shares were dropping some yesterday night after reporting better than expected revenue, on weaker earnings. Again, this company is getting hit from nearly every angle. The stock is falling below support at $100 to $102 region, with plenty of room to continue lower to $92.85.

Disney Chart

Disney Chart

Alibaba (BABA)

I noticed some bullish options betting yesterday in Alibaba (NYSE:BABA), and the potential for the shares to rise to around $210.

Alibaba Chart

Alibaba Chart

Citigroup (C)

Citigroup (NYSE:C) finished the day lower by 2.6% and one the uptrend. A break below sends it to $41.20. I’m keeping a close on these banks and rates, and you should too.

Citigroup Inc Chart

Citigroup Inc Chart

Original Post

The Stock Market May Have Been Handed A Harsh Dose Of Reality

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