US stock market recap today: Geopolitical risks rise, CPI big test is coming

First the conclusion: This is a washout, not a shift into a bear trend
These past two days, the market has indeed been a bit tough. The S&P closed down 0.77% to around 0.8%, the Nasdaq-100 tumbled nearly 1.9%, and the Russell 2000 also slid by almost 0.8%. On the surface, the declines don’t look that extreme, but internally it was a significant rotation and a bloodletting: Nvidia fell 3.52%, Tesla dropped 3.19%, Meta slid 1.86%, and AI hardware and semiconductors were hit almost across the board. But at the same time, software performed quite strongly: Microsoft, ServiceNow, Palo Alto, Palantir and others surged against the tide. Clearly, capital is pulling back from high-beta tech and discretionary names and rotating into defensive sectors like energy, utilities, staples, and financials to hedge risk.
An index falling modestly while internally rotating violently is actually the market digesting earlier gains—doing a healthy position rebalancing rather than sending a signal of a trend reversal.

What happened today
The geopolitics line has upgraded again. Iran hit commercial ships in the Strait of Hormuz and announced an indefinite closure of the strait. The US military launched airstrikes on Iran for the third time in the past week, hitting about 140 military targets, and for the first time in a real-world operation used maritime drones. Trump announced the restarting of blockade measures for the Strait of Hormuz, requiring all transiting commercial vessels to pay a security clearance fee equal to 20% of the cargo’s value. On Sunday, only 14 ships dared to transit. As a result, crude oil jumped nearly 9% in a single day, and over the past few days the rebound has accumulated to more than 12%. Trump also previewed that he will deliver a televised address to the nation on Thursday night; the wording of this speech will be a key variable for near-term market sentiment. Most likely it’s taco—again saying he won big.

Three big focuses this week: CPI, big bank earnings, and AI mega-cap earnings
Before the Tuesday open, June CPI data will be released—this is the biggest macro event of the week and will directly determine the Fed’s next policy direction. With crude oil surging and the strait blockade shock layered in, worries about a rebound in inflation are heating up. Fed Governor Waller previously sent hawkish signals, saying that if this week’s CPI comes in hot, the Fed would consider tightening monetary policy. In the interest-rate futures market, the probability of a 25 bps rate hike in July has risen to above 41% at one point. The 2-year Treasury yield surged to 4.28% and the 10-year broke above 4.6%, while the 30-year pushed past 5.1%. The market even has started pricing in expectations for two rate hikes later this year. The newly appointed Fed Chair Wos(h) will also testify before Congress on Tuesday and Wednesday, and the market will closely watch his latest remarks on monetary policy.
Also, this week marks the official start of the Q2 earnings season. Starting Tuesday, big banks including JPMorgan, Goldman Sachs, Citigroup, and Bank of America will release their results in sequence. In this stage, the banking sector (XLF) is in a slow upward, “decelerating” trend; as long as it doesn’t break below key supports like 324, the overall financial system remains healthy.
The options market expects that after TSMC’s earnings, the stock price’s likely move will be around 6%. For major banks, the implied move is generally between 3.5% and 5%.
TSMC, ASML, and Netflix earnings will also be important windows to observe the intensity of AI capital expenditure. Morgan Stanley forecasts that by 2028, AI infrastructure capital spending will reach $1.4 trillion.

Technicals: The S&P and Nasdaq-100 are in a descending channel and triangular convergence, but this setup will likely break upward
Right now both the Nasdaq-100 and the S&P are trading in a converging channel. By probability, this kind of triangle convergence is more likely to break upward.
For example, the S&P is likely to do a fake breakout above the prior high at 7630 first, push to 7700 or even 7800, and then pull back. After that, a typical deeper correction of about 5% to 10% is likely to follow. This pullback and consolidation process could last until October. The real “capitulation” phase—bottoming/washout—is expected to show up in September to October, with a move pattern similar to the one from July to October 1998.
But one point to emphasize here: even if such a pullback really happens, it doesn’t mean the bull market is over. The S&P’s forward P/E is around 20x. If it truly corrects to around 7000, the P/E would compress to 17x to 18x—close to the historical average from the past 10 years—representing a fairly healthy valuation digestion. Combining the Q2 expectations of 23% earnings growth and 11% revenue growth, after valuation compression is done, the year-end period is likely to see another strong rally, with targets in the 8000 to 8200 range.

For SPY in the short term: Last week it fell from the 756 high and closed below 750. Key support below is 740. If CPI comes in hot and triggers further downside, the next support levels are 731 to 730 and 727. To resolve near-term pullback pressure, price needs to reclaim 752 and 756. Worth noting: the Gamma flip line for the S&P 500 is currently near 7458. As long as that level is held, the broader market remains in a positive-Gamma low-volatility environment where market makers buy dips and sell rips. If it breaks, volatility would truly get amplified.

Panic sentiment is already warming up, but that in itself is a contrarian indicator
The Fear & Greed Index has fallen from neutral last week into the fear range. Historical data shows July to September are often periods when VIX is elevated and US equities’ seasonality is weaker. This lines up with the earlier view that the pullback and bottoming most likely happen in September to October. VIX got support and rebounded last week in the long-term bottom area around 15. It has already returned above the 9-day moving average and the HMA. In the near term, a quick surge to the 19 to 20 range, even to 20 to 25, is not ruled out. Keep a close eye on two core key levels: 15 and 20. This week also coincides with options expiration week (OPEX). Combined with historical patterns, in this cycle it’s difficult for the market to experience prolonged one-way, continuous selling. In a positive-Gamma environment, pullbacks usually last only 1 to 2 days, and the index has a chance to find support at the 10-day or 20-day moving averages.

One divergence worth paying attention to:民间实时通胀数据(Trueflation) has already fallen to around 1%, but the market’s rate-hike expectations are being priced in too high. There’s a mismatch here. If subsequent CPI data confirms that inflation is indeed moving down, the market’s over-hedging and over-concern about rate hikes should gradually fade, which would actually lay a more solid foundation for the strong rally later this year. Also, the spread between single-stock implied volatility and the S&P implied volatility has risen to a historical high (around 32 points), indicating that the sharp swings at the individual stock level will continue for a while. But that is more about structural differentiation rather than a signal of systemic risk.

Summary: This is just an intermediate-term washout; the logic of staying bullish on the bigger direction hasn’t changed
Putting all these pieces together, this week is indeed packed with variables.
Geopolitical escalation, CPI big test, renewed rate-hike expectations, and dense earnings from big banks and AI mega-caps are likely to further amplify near-term volatility. But from a broader cycle perspective, this looks more like a healthy valuation digestion and sentiment release in the middle of a bull market—not a turning point in the trend. Real inflation data is actually moving down; the fundamental backdrop for Q2 earnings growth remains solid; and the S&P’s Gamma structure is still leaning to the bullish side. If we truly see a 5% to 10% pullback sometime between mid-August and mid-October, historical experience tells us that after a washout at this magnitude, the year-end period is when the real strong rebound starts—targets again at 8000 to 8200. Stay patient: treat the pullback as a window to build positions—buy the dip in individual stocks, buy at lower levels, and then hold patiently.