So far in May its only really the Nasdaq that is up. So its a fairly narrow market post the April bounce.
The Corona shutdown fall out is starting to hit the headlines.
For example a Reuters report showed 10% of Spanish businesses closed in March.
If it creeps lower for now and then starts to sell off, people will panic sell and we could easily punch through the March lows.
This chart shows Business Loans in the US.
Prior to Covid they had fallen to almost flat YoY.
Business loans normally shrink in a recession.
But now they are growing almost 30% YoY.
That is debtor in possession type financing whether it is PPP type loans or revolvers being drawn, its debt (a liability and part of the capital structure) being used to cover lost cash flow (an asset and part of the current flow/ activity of the business).
Basically businesses are being bled dry and will have to drastically cut costs, which makes a second leg of contraction more likely than even a U-shaped stabilisation.
Additionally, some of the most hit areas like Casual Dining or Hotels will take a lot of time to get back to prior operating volumes, so are likely to be defaulting in Q4.