Here’s why the S&P 500 Index, SPYM, SPY, and VOO ETFs may drop 5.4% soon

The S&P 500 Index has pulled back in the past few days, moving from the year-to-date high of $7,618 to $7,400. This retreat has happened amid profit-taking among investors and as US bond yields jumped following last week’s strong jobs numbers. Still, there is a likelihood that the index and its ETFs like, VOO, SPY, and SPYM may retreat further. 

S&P 500 Index at risk as US bond yields jump

One reason why the S&P 500 Index and its ETFs like VOO, SPY, and SPYM may retreat further is that US bond yields are going up as odds of Federal Reserve interest rate hikes rise.

Data shows that the ten-year yield rose to 4.55%, its highest point since May 22nd this year. The two-year yield rose to 4.2%, its highest level since February 2025. It has jumped from the year-to-date low of 3.37%. Also, the 30-year yield has moved comfortably above 5%.

US bond yields are sending a message about the Federal Reserve, with analysts predicting that the bank will hike rates this year. A report released last week showed that the economy created over 172k jobs last month, while the jobless rate remained at 4.3%.

Another report expected on Wednesday are expected to reveal that the US inflation continued rising in May. The average estimate is that the headline CPI rose to 4.3% in May, moving further away from the Fed’s target of 2.0%. 

As such, it is likely that the stock market will have a brief retracement as traders position for a rate hike. If this happens, it will likely spark another confrontation between President Donald Trump and Kevin Warsh.

SpaceX IPO may trigger a stock market pullback

Another potential reason why the S&P 500 Index and its top ETFs like VOO and SPY may crash further is the upcoming SpaceX IPO, which will happen on June 12. 

In theory, the IPO should be bullish for the stock market. For one, estimates are that the company will raise $150 billion, double the $75 billion it planned to raise. 

In practice, however, the IPO may lead to a pullback if it follows a similar paths to other companies. In this case, there is a likelihood that the SPCX stock will surge after the IPO and then retreat. This is a similar situation that happened with other companies like Circle Internet Financial, Figma, and Medline. 

Such a pullback may lead to more weakness across the board as investors start booking profits. We saw this brutal sell-off on Friday as top AI stocks like Broadcom and AMD plunged.

Technicals suggest that the S&P 500 Index may retreat

SPX Index chart | Source: TradingView

The daily chart shows that the S&P 500 Index peaked at $7,618 earlier this month and then pulled back to $7,400. A closer look shows that the Percentage Price Oscillator (PPO) have made a bearish crossover. This crossover is a bearish sign in technical analysis.

The Relative Strength Index (RSI) has dropped from the overbought level of 77.35 to the current 50. It is also pointing downwards, which is a bearish sign. 

Therefore, the most likely scenario is where the index retreats and then retests the key support at $7,000, its highest point in January. A move towards that level will be bullish as it will confirm the break-and-retest pattern. Such a drop will also happen with the VOO, SPY, and SPYM ETFs. They will eventually bounce back to a new record high.