Stock market triple threat puts traders on alert as S&P 500 slips

A stock market triple threat is flashing across Wall Street charts after Treasury yields, crude oil and the U.S. dollar all broke higher last week, while the S&P 500 dropped below a closely watched short-term trend line, according to MarketWatch.

Craig Johnson, chief market technician at Piper Sandler, described the cross-market setup as a “triple threat” for stocks, MarketWatch reported. He said the move in the S&P 500 warns of “a potential correction pullback occurring this summer.”

The pressure landed during a rough week for equities. MarketWatch reported that disappointing earnings from Alphabet and Tesla weighed on big technology shares and the artificial-intelligence trade.

Why are chart watchers worried about the stock market?

Chart watchers are focused on three breakouts that could make life harder for equities: higher Treasury yields, higher oil prices and a stronger dollar. A breakout means a price or yield has moved above a level traders had treated as resistance, which can suggest the prior trend has fresh momentum.

The 10-year Treasury yield, a benchmark used in mortgage pricing, climbed above resistance marked by its May 19 closing high of 4.66%, according to MarketWatch. Even after easing slightly on Friday, the yield finished the week at 4.68%, its highest weekly close since January 2025, FactSet data cited by MarketWatch showed.

MarketWatch reported that the yield move, along with a jump in oil prices as the Iran war intensified, raised expectations that the Federal Reserve could increase interest rates sooner rather than later.

West Texas Intermediate crude futures also moved above their 50-day moving average, according to MarketWatch. FactSet data cited in the report put that 50-day moving average at $84.21 on Friday, with chart levels to watch on the upside beginning around the May highs in the $105 to $107 range.

The 50-day moving average is a rolling average of the past 50 trading days. Many traders use it as a short-term trend marker, and prices above it can be read as technically stronger than prices below it.

The third part of the threat is the ICE U.S. Dollar Index, which measures the greenback against six major foreign currencies. MarketWatch reported that the dollar confirmed a breakout from a long-running consolidation pattern, after an initial June breakout and a later pullback that tested support.

A stronger dollar can hurt large U.S. companies with overseas business because foreign sales and profits translate into fewer dollars. MarketWatch noted that this matters for stocks because earnings growth has helped drive the market over the past year.

Where can investors hide without leaving stocks?

Johnson also pointed to areas of the market showing stronger technical setups, according to MarketWatch. The report said the recent S&P 500 weakness could encourage a more defensive rotation rather than a full exit from equities.

• Energy: The Energy Select Sector SPDR ETF has moved above its 50-day moving average and is threatening to break out of a recent flag consolidation pattern, according to MarketWatch.
• Financials: The Financial Select Sector SPDR ETF has looked technically strong after testing support at its 50-day moving average in early June and reaching a record high earlier this month, MarketWatch reported.
• Industrials, utilities and healthcare: Johnson said these sectors showed “relative strength above their 50-DMAs” last week, according to MarketWatch.

FactSet senior earnings analyst John Butters provided data showing that the financial sector beat second-quarter earnings expectations by wide margins and posted the largest revenue growth rate among the S&P 500’s 11 major sectors, MarketWatch reported.

MarketWatch also noted that higher longer-term interest rates can help banks because they can earn more on longer-term assets such as loans while funding them with lower-rate short-term liabilities.

This story draws on original reporting from MarketWatch.