Bluntly, the Chicago PMI was a disaster:

• Prices paid continued to signal broad deflation;
• Employment weakened further;
• New Orders and Order backlog indicated further softness;
• Buying policy reversed April's short boost and is collapsing

Bright spot:

• Production up one point from 42 to 43.

Note that the "bright spot" is really only a slowing in the rate of dimming, as numbers under 50 indicate contraction.  So there's a slower rate of contraction - in one part of the index.

Two of the comments are particularly telling:

“If Obama continues to have the government take over and run the auto industry either by direct control or increased regulation, the recession will last for years.

“Euphoria seen in stock market has not been reflected in business conditions.

Now to be fair there were some positive comments.  But the index numbers were awful.

Why is this important?  Because ISM (the national index) comes out next week, and the Chicago PMI is often a good leading indicator for where that is going to wind up.

I see no "green shoots" - only gnarly weeds, and challenge people to show me where the true business improvement is supposed to be coming from.

I certainly don't see it, and the fact remains that the alleged "improvement" in the stock market over the last two months has been nothing other than a pump job, engineered in an attempt to flip consumer confidence and spur more (imprudent) borrowing by spurting capital into the market via buybacks of both mortgage and treasury debt (the former, I again repeat, being blatantly outside of Federal Reserve authority.)

The critical error in this strategy is that you can't borrow your way out of a credit binge hangover.  That we are attempting to violate the laws of mathematics is clear: Home mortgage traffic is dependent on rates under 5%, as the recent spike higher effectively shut down the finance pipeline - overnight.

This says loud and clear: Prices are still too high and we continue to cram ourselves further into the "coffin corner."

Stock prices are ultimately all about profits, and nothing else. 

How do you grow profits on a sustainable basis when assets refuse to clear without interest rates well below where market risk equilibrium takes them absent government interference?

The longer this continues the worse the ultimate damage will be, and for those who pile back into the stock market at S&P 900, don't tell me later that you weren't warned!

Disclosure: Still lightly short the broad market (S&P 500)