S&P 500 and VOO ETFs could slip 5.4% as Treasury yields rise

The S&P 500 has slipped from its recent high of $7,618 to around $7,400, and analysts flag a possible 5.4% decline in the index and its flagship ETFs — VOO, SPY and SPYM — if Treasury yields keep climbing【2】.

Yield pressure and technical signals

Higher Treasury yields are the primary catalyst. The 10‑year yield rose to 4.55%, its highest since 22 May, while the 2‑year reached 4.20%, a level not seen since February 2025【2】. Those moves reflect market expectations that the Federal Reserve may keep rates higher for longer, tightening financing conditions for equities.

Technical analysis adds to the downside case. The S&P 500’s daily chart shows a Percentage Price Oscillator (PPO) bearish crossover and a Relative Strength Index (RSI) falling from an over‑bought 77.35 to roughly 50, both classic reversal signals【2】. The combination of rising yields and weakening momentum suggests the index could test the $7,000 support that held in January, a level that would confirm a broader correction.

Economic backdrop and potential catalysts

Recent U.S. employment data showed a robust job creation of over 172 k jobs and an unchanged unemployment rate of 4.3%, reinforcing expectations of a tighter monetary stance【2】. Inflation data for May is projected to show headline CPI at 4.3%, well above the Fed’s 2% target, further feeding concerns of prolonged rate hikes【2】.

In addition, the upcoming SpaceX IPO scheduled for 12 June could add volatility. While IPOs are typically bullish, comparable listings (e.g., Circle, Figma) have triggered short‑term sell‑offs as investors rotate into cash after initial price spikes【2】. A similar pattern could exacerbate the equity pull‑back.

What to watch

• Yield trajectory: A sustained 10‑yr yield above 4.55% or a 2‑yr yield above 4.20% would reinforce the downside bias.
• Key price level: A break below $7,000 on the S&P 500 would signal a deeper correction and could accelerate ETF outflows.
• Upcoming data: May CPI (expected 4.3%) and the next Fed policy meeting will clarify the inflation‑rate path and potential further rate moves.

If yields stabilize and the index holds above $7,000, the correction could be limited, but a continued rise in Treasury yields combined with the technical signals points to a heightened risk of a 5‑plus‑percent slide in the S&P 500 and its flagship ETFs. The market’s next move will hinge on whether monetary policy expectations soften or stay the course.