Yesterday, US equity indices finished mixed. The S&P 500 fell by 0.26%, and the Nasdaq 100 dropped by 0.41%. The Dow Jones Industrial Average rose by 0.41%.

Markets were again under pressure, the fourth down day in five. The MSCI Asia Pacific index fell by 1.6%, and South Korea's KOSPI lost more than 4%. US index futures are down about 0.2% today after Tuesday's volatile session on Wall Street. Gold slid by roughly 2%, dipping below $4,200/oz. The 10-year US Treasury yield rose by two basis points to 4.53%. Two-year yields are at their highest level in more than a year.

All eyes are on tonight's release of US May CPI data. The consensus calls for headline CPI to rise by 4.2% year-on-year (vs. 3.8% in April). Core inflation is expected at 2.9% vs. 2.8% a month earlier. For new Fed Chair Kevin Warsh, who will preside over his first FOMC meeting on June 16–17, the CPI print will be the first serious policy test. If the number comes in above expectations, it will be extremely difficult to convince markets that interest rate cuts remain possible.

The bond market is already drawing its own conclusions. Traders are actively positioning for several Fed hikes over the coming months; some see a move as early as September. National Australia Bank said yesterday the FOMC will likely drop language hinting at easing next week, and Warsh risks taking a firmer stance than the market expects. The longer the economy remains resilient amid rising inflation, the greater the pressure on the Fed to act.

Geopolitics is adding to the nerves. The US carried out fresh airstrikes on Iran after an American military helicopter was downed. Oil barely reacted — Brent partially recouped Tuesday's losses to settle at near $92. However, the Strait of Hormuz remains de facto blockaded, and talks are stalled. For the Fed, this means the energy price shock will not disappear in the coming months, narrowing room for a policy pause with every new headline.

Technically, the S&P 500 analysis suggests that the immediate task for buyers today is to overcome the resistance level of $7,355. Doing so would confirm upside and open the path to $7,381. Maintaining control above $7,404 would further strengthen buyers' positions. On the downside, buyers need to defend $7,339. A break below that level would likely push the index back to $7,319 and open the way to $7,300.