S&P 500 Rally at Risk as Wall Street Warns of Resurgent Inflation

The S&P 500's powerful rally is hitting a wall. Wall Street strategists are sounding the alarm on a familiar threat: inflation.

Rising energy prices and climbing Treasury yields are combining to pressure the market. The May 15 selloff captured the shift, with the Dow falling 1%, the S&P 500 dropping 1.25%, and the Nasdaq sliding over 1.5%.

The catalyst was surging oil prices, which feed directly into consumer costs and corporate margins. Treasury yields rose in tandem, signaling the market expects the Federal Reserve to keep rates higher for longer.

While earnings have been strong, margins face pressure from higher input costs. The real battleground is interest-rate expectations. The market is repricing central bank policy risks, with confidence in multiple rate cuts eroding with each hot inflation print.