Morning Briefing: Rising Oil and Treasury Yields Test the S&P 500 Rally

Stocks are under pressure this morning as rising oil, higher Treasury yields, and renewed concern around artificial intelligence weigh on the broader market. The bigger fight is between a still bullish S&P 500 structure and growing pressure from inflation, Federal Reserve policy, energy prices, and the possibility that artificial intelligence spending slows.

In One Minute

The S&P 500 Index (SPX) is down about 0.7%, with the daily move reaching roughly 0.76%, but the larger structure remains bullish as long as 7,570 to 7,575 holds. West Texas Intermediate Crude Oil (WTI) traded as high as $104.40 before slipping back below $104; the 10 Year U.S. Treasury Yield (US10Y) is testing the critical 5% area, and the Federal Reserve has about an 87% probability of raising rates by 25 basis points Wednesday. Artificial intelligence infrastructure stocks are selling off while beaten down software stocks are catching a bid, and Bitcoin (BTC) remains bullish as long as $76,000 to $75,500 holds.

The Setup

The market is dealing with several pressures at once. Consumer Price Index and Producer Price Index data were in line or slightly hotter than expected, oil is elevated, Treasury yields are pushing higher, and the Federal Reserve is expected to raise rates Wednesday at 2:00 PM ET.

The 25 basis point increase itself is probably not the main event because an 87% probability means much of it is already priced in. The bigger catalyst comes at 2:30 PM ET, when Kevin Warsh discusses what happens next.

If the message is that several more hikes are needed, stocks could come under heavier pressure. If the Federal Reserve signals that it can pause for the next few meetings, that could give the market room to rally.

The S&P 500 still has an important technical cushion. I remain bullish above 7,570 to 7,575. A break below 7,570 shifts the structure to neutral down toward 7,400. A break below 7,400 would become a much more serious warning for additional downside.

What Changed

Oil became one of the biggest drivers overnight. West Texas Intermediate Crude Oil pushed to $104.40 and made a new short term high, but it ran directly into a major resistance trend line that has repeatedly controlled price.

That same trend line connected several highs from late 2025 and early 2026. When the war with Iran began, oil gapped above it and eventually ran toward $120 per barrel. Price later returned to that line several times, eventually broke below it, and has now retraced directly back into the same resistance.

Oil later slipped back below $104, and as it moved lower, the S&P 500 began recovering some of its earlier losses. That relationship matters right now because higher oil increases inflation pressure, which pushes yields higher and makes the Federal Reserve's job more difficult.

The 10 Year U.S. Treasury Yield is another major pressure point. I am watching 5% closely, with the exact 2023 high at 5.02%. A brief move above that level is one thing, but I do not want to see a daily close above it. That could begin a much larger corrective move in the market.

If long-term yields continue rising, the concern eventually expands beyond stocks. Higher borrowing costs increase recession risk and could potentially create trillions of dollars in losses and debt defaults.

The U.S. Dollar (USD) is also strengthening. Rising oil and broader instability are contributing to that move, and nervousness around artificial intelligence is adding another reason for investors to move toward the dollar. That strength is putting additional pressure on gold and silver.

Artificial intelligence is now driving a major rotation inside technology. Oracle Corporation (ORCL), NVIDIA Corporation (NVDA), and Lumentum Holdings Inc. (LITE) are under pressure as investors question whether slower artificial intelligence development could eventually mean slower spending on data centers and infrastructure.

At the same time, ServiceNow Inc. (NOW) and Adobe Inc. (ADBE) are moving higher. These software companies were hit hard because investors feared artificial intelligence would eventually replace much of what they do. If artificial intelligence development slows, that threat may take longer to materialize, which gives those software names some breathing room.

I am not assuming the entire artificial intelligence investment cycle suddenly disappears. Demand already exists even without another major jump in capabilities. Pullbacks can happen without ending the broader buildout.

The strategic problem is that even if U.S. companies slow development, China, Russia, North Korea, and others may not. That keeps the artificial intelligence race alive even while concerns about job displacement, cybersecurity, biological weapons, and increasingly powerful systems continue growing.

Digital Assets and Crypto

Bitcoin remains one of the cleaner bullish structures in the market right now.

The key support zone is $76,000 to $75,500. As long as Bitcoin holds that area, I view the current sideways action as bullish consolidation rather than a breakdown.

The structure looks like a bull flag. Bitcoin made a strong move higher and is now digesting those gains through sideways consolidation. The longer that consolidation continues while support holds, the greater the potential for another meaningful move when price finally breaks out.

But the bullish argument is completely dependent on that support zone. If $76,000 to $75,500 breaks, it opens a trapdoor for significant downside. Until then, the consolidation remains constructive.

Why It Matters

The market is becoming increasingly connected through rates.

Higher oil increases inflation concerns. Higher inflation keeps pressure on the Federal Reserve. That pushes Treasury yields higher, strengthens the dollar, pressures gold and silver, and makes high-valuation stocks more vulnerable.

Gold (XAU) is already breaking lower from a head-and-shoulders pattern. The neckline has broken, which creates a potential measured move toward approximately $3,950. That bearish setup remains active unless gold recaptures the broken trend line.

Silver (XAG) has a similar head and shoulders pattern. If silver closes below its neckline, the downside target is approximately $55.50.

Natural Gas (NG) is moving in the opposite direction technically. Price has moved back above an important trend line that separates bullish and neutral conditions. I remain bullish heading into the cooler months as long as natural gas stays above $2.82 to $2.83.

Within technology, Lumentum is approaching a technical pivot around $820 that could provide day trade support.

NVIDIA has a gap fill around $210, with shares trading around $212. That $210 area is on my radar for a short-term setup. On a larger swing basis, $200 is the major daily support. If $200 holds, it could become a buying area. If it breaks, downside could accelerate quickly.

Apple Inc. (AAPL) has a gap fill around $338, which is a potential day-trade short area.

Key Levels

The three levels that matter most for the broader market are 7,570 on the S&P 500, 5% to 5.02% on the 10 Year Treasury Yield, and the current resistance area in oil. Those three markets are tightly connected through inflation and interest rate expectations.

Bull Case

The bullish path starts with the S&P 500 holding 7,570 to 7,575 while oil backs away from resistance and Treasury yields fail to establish a daily close above 5.02%.

A less aggressive Federal Reserve message after Wednesday's rate increase could also remove some pressure from stocks.

Bitcoin stays constructive as long as $76,000 to $75,500 holds. Natural gas remains bullish above $2.82 to $2.83.

NVIDIA can stabilize around the $210 gap area, with $200 providing the more important swing support. Gold would invalidate its bearish head and shoulders setup by recapturing its broken trend line.

Software stocks such as ServiceNow and Adobe can continue benefiting if investors become less worried that artificial intelligence will immediately replace their businesses.

Bear Case

The bearish case becomes more serious if the S&P 500 breaks below 7,570. That moves the index into neutral territory toward 7,400, and a break below 7,400 would open the door to much larger downside.

A daily close above 5.02% on the 10 Year Treasury Yield would add significant pressure, especially if oil continues climbing from the current resistance area.

Gold remains vulnerable to approximately $3,950 while its bearish pattern stays active. Silver could move toward $55.50 if it confirms the neckline breakdown.

Bitcoin becomes much more vulnerable if $76,000 to $75,500 fails.

NVIDIA also carries meaningful breakdown risk below $200 because selling could begin to cascade once that major daily support gives way.

What to Watch Next

Wednesday's Federal Reserve decision at 2:00 PM ET is the first major catalyst, but the more important event is the 2:30 PM ET message about future rate increases.

Watch whether the 10 Year Treasury Yield closes above 5% to 5.02%, whether oil breaks through or rejects its major resistance trend line, and whether the S&P 500 can continue holding 7,570 to 7,575.

Gold and silver need to show whether their head-and-shoulders breakdowns confirm or fail. Natural gas needs to remain above $2.82 to $2.83.

In technology, watch $820 on Lumentum, $210 and $200 on NVIDIA, and the $338 gap on Apple.

In crypto, the entire Bitcoin setup comes back to $76,000 to $75,500.

Bottom Line

The most important market relationship right now is oil, Treasury yields, and the S&P 500. Stocks remain technically bullish above 7,570, but rising oil and a 10 Year Treasury Yield pushing toward 5.02% could quickly change that picture.

Bitcoin remains constructive, natural gas remains bullish above support, while gold and silver are dealing with active bearish patterns, and artificial intelligence stocks are going through a major rotation.

This is not the time to guess ahead of the levels. Let price confirm the move, respect the support and resistance zones, and stay patient while the Federal Reserve, oil, and Treasury yields decide the next direction.