How would you react to an E2 who "smart mouths" you in formation?

Wall to wall council.

His mouth as well as his brain - what there is of it, must be rearranged, perhaps privately. and or brought on charges or singled out for special duties until he realizes to get along you must go along.

remind him I've never lost an ambush,,,doesn't have to be physical just have him hold fast along with his team leader to let him reconsider his response.

remedial training Followed by a counseling statement extra duties and if he continues with his mouth and lack of respect for his chain of command then meeting with higher up

Reach over and grab my collar look to see me rank insignia, and loudly ask, "Did my shit fall off?" Sgt Holzhauser in 1970 taught very effective communications.

i would have him put in the brigg for a time

Make a public example of him.

Ask him how long it's been since he had his gums bled. If he has a smart ass reply, then hook him up at the earliest possible convenience.

I'd find the nearest Buck SGT and have him smoke the youngster ass. Or do they not do that anymore?

You smoke the shit out of him and remind him when he stands in the chain of command and when he has the right to refuse an order. Then after all that is finished don't let him leave just all pissed and thinking your an ass or jerk which I really don't care because you're doing your job. Sit him down or take it to the shade or have an informal one on one and try to find out what's going on if this is abnormal for him. If not remind him if he doesn't change and this behavior continues you will see him on his way out of the military by any means necessary.