It appears another pillar of support for the stock market is breaking down. Industrial stocks have been hammered in recent days, reflecting weak second-half guidance and concerns about the economic outlook. Even investors without heavy exposure to the industrial sector should sit up and take notice.

First, let’s look at the source of industrials’ underperformance. Economic data has been weak throughout July, with capacity utilization, industrial production and factory orders all landing on the soft side. The largest negative surprise occurred Wednesday morning, when June durable goods orders came in at -2.1% versus expectations of a 0.5% gain.

Recent second-quarter earnings reports also have done little to help boost the sector’s performance. A number of industrials have reported weak second-half guidance, which has pressured the shares even of companies that have met or exceeded second-quarter estimates. With end markets showing signs of weakness, the threat of downward earnings revisions in the latter half of the year is now looming large.

Companies seen as having the highest sensitivity to consumer spending, such as Illinois Tool Works (NYSE:ITW), generally have been the hardest hit in the recent sell-off. Rising raw materials costs also are an issue being cited by certain companies, including Carlisle Cos. (NYSE:CSL), a diversified manufacturer of construction materials, auto parts and industrial food service supplies.

Taken together, the recent news flow indicates industrial companies are increasingly vulnerable to the margin pressures caused by rising input costs and falling end demand. All of this comes at a time in which industrials, as a group, are not particularly cheap relative to the broader market.

Accordingly, a number of bellwether names in the sector have begun to print alarming-looking charts. Among those that warrant a close look are:

Transports, automakers and package-delivery companies also are among the key subsectors of industrials that have been taking it on the chin in the recent sell-off.

In terms of the bigger picture, what does the weakness in industrials tell us about the market as a whole? Historically, the end of a bull market phase often is signaled by the former leadership sectors weakening in succession. We already have seen financials — as gauged by the Financials Select Sector SPDR (NYSE:XLF) — break down below their 200-day moving average to a level more than 11% off of their previous high. Now, industrials appear to be following suit. The Industrials Select Sector SPDR (NYSE:XLI) fell to a low of $35.23 on Wednesday morning, which put the ETF slightly below its 200-day moving average for the first time since late September. More information about this topic can be found in our July 13 article available here. With the Materials Select SPDR (NYSE:XLB) now just above its 200-day average and the broader market seemingly forming a double-top, the breakdown in the XLI is an ominous sign.

For the past two years, the U.S. market has shown a tendency to catch investors off guard by rallying just when the outlook was beginning to look most bleak. This time, however, there appears to be little hope of a rescue from a positive news surprise. Investors should therefore keep close tabs on the industrial sector to watch how it responds at this critical level.