S&P500 Forecast: Rising Yields Threaten Wall Street Rally This Week

Yields Stall the Rally Again

Record highs on Friday. Futures lower Monday. June E-mini S&P 500 Index futures are pointing down, Dow futures are off more than 300 points, and the Nasdaq-100 just posted its worst single session since late March. Yields pushed the selloff on Friday and nothing changed over the weekend to stop it.

Technical Outlook

June E-mini S&P 500 Index Futures Analysis

June E-mini S&P 500 Index futures are lower early in the session on Monday. The main trend is up, but the market is down for a second straight session, breaking a bullish pattern that had been in place since March 30. The last time the index had posted two consecutive lower-lows was March 26 and March 27.

The chart pattern is just signaling weakness at this time. The main uptrend isn’t even being threatened. It’s going to take some time to form a pattern that is indicative of a major change in trend. A trade through 7540.00 will signal a resumption of the uptrend.

The minor trend is being exposed, however. A trade through 7363.25 will change the minor trend to down. This will shift momentum to the downside with potential swing bottom targets coming in at 7199.50, 7131.25 and 7079.25.

Besides the swing bottom targets, traders are also eyeing a series of minor pivot prices at 7369.75, 7335.75 and 7309.75. Since the main trend is so strong, “buy the dip” traders will be eyeing these levels for new entries. If 7309.75 is taken out with conviction, prices could accelerate to the downside with 7153.50 the next likely target.

It may be a little early in the process but the 50-day moving average at 6967.72 and the 200-day moving average at 6891.86 are potential downside targets along with the major 50% level at 6946.75. A move into these levels will alleviate a lot of the upside pressure that has been building.

It should be noted that the first few days down from a major top are fueled by long liquidation. The heavy short-selling usually doesn’t come in until there is a test of the top.

The key area we’ll be watching today is 7369.75 to 7309.25. Trader reaction to this area will go a long way in determining whether there will be a quick retest of the record high, or a sharp break that some may even call a crash.

Bond Yields Are Running This Market

The U.S. 30-year Treasury yield hit its highest level in roughly a year on Friday. Bond yields in the United Kingdom and Japan moved sharply higher at the same time. When long-term yields are climbing across multiple markets at once, that is not one country’s problem. The tech sector absorbed the first hit because that is how it always works.

Higher yields make future earnings worth less today and the stocks that ran hardest this year on growth expectations are the ones giving it back the fastest. The Nasdaq-100 dropped 1.5% on Friday. The Dow briefly reclaimed 50,000 last week before pulling back. Record highs on the index, and the same session was the worst day for tech in two months.

Oil Keeps the Pressure On

June West Texas Intermediate crude oil is back above $106 a barrel in premarket trading. Spot Brent crude oil is near $110. The U.S.-Iran conflict is not close to resolution and the Strait of Hormuz is staying effectively closed. The way I see it, every week that passes without a deal is another week the market has to price sustained energy costs through the summer. Higher energy costs feed inflation and inflation keeps the Fed from cutting. The oil story and the rate story are the same story right now.

Rate Cuts Are Gone

Three consecutive upside inflation misses have taken near-term rate cuts off the table completely. There is growing talk now about whether the next move from the Fed is a hike. I’ve watched this shift happen fast. Political pressure from President Trump to lower rates is not moving the needle. The inflation data is what matters and it is not cooperating.

Stocks in the News

Regeneron Pharmaceuticals fell more than 11% after its skin cancer treatment failed in a late-stage trial. Dominion Energy surged more than 12% after NextEra Energy announced an all-stock acquisition. Macy’s gained nearly 4% after Berkshire Hathaway disclosed a stake in the department store chain.

Delta Air Lines moved higher after Berkshire revealed a $2.6 billion investment in the airline. Bio-Rad Laboratories jumped after Elliott Investment Management disclosed a position. Coinbase and Robinhood both fell after Bitcoin dropped more than 5% over the weekend and slipped below $77,000. Salesforce declined after Bank of America reinstated coverage with an underperform rating.

What to Watch

Nvidia reports Wednesday after the bell. Walmart is Thursday. Target is Wednesday. The retail prints will show whether rising energy costs are hitting the consumer the way the data suggests they should. Nvidia is the one that matters most for this market. The AI spending story is the single reason these indexes are at record highs and one miss on guidance puts that multiple at risk. Two of the week’s biggest events landing on the same session Wednesday is not a setup to take lightly.

The key level in the June E-mini S&P 500 is 7363.25. A trade through that changes the minor trend to down and shifts momentum in that direction. Below there, 7309.75 is the next line that matters. Trader reaction to the 7369.75 to 7309.25 area today tells you whether this is a dip that gets bought or the start of a bigger pullback.

More Information in our Economic Calendar.