U.S. corporate health: The PC market continues to languish. Wal-Mart's ( WMT) results point to a stressed consumer, and in a little-reported event last Wednesday, Moody's downgraded Alcoa ( AA) to junk status. Alcoa's credit is now Ba1 with a stable outlook, which is significant because Alcoa is a member of the Dow Jones Industrial Average and widely seen as an economic bellwether in its position as a major global aluminum supplier. A slowdown in demand for aluminum is viewed as a precursor for slowing economic activity, much like copper and lumber, and so weakness here confirms other indications of the slowing worldwide economy. Alcoa typically kicks off earnings season, and so its next report in early July could be interesting and will be carefully scrutinized for signs of weakness in the macro economy.
U.S. markets now face several significant challenges that could easily bring on a bout of June doom and gloom. The recent rally has been completely unhinged from economic reality, as macro indicators like consumer spending and commodity prices point to a slowing global economy and technical indicators point to potential upcoming weakness in major U.S. markets. U.S. corporations are starting to show signs of stress and an atmosphere of rising interest rates adds further uncertainty to the overall picture for June. Wall Street Sector Selector remains in "red flag" status, expecting an increasingly high risk environment ahead. At the time of publication the author had no position in any of the stocks mentioned. Follow @WSSectorSelect This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.