U.S. stocks continued their decline during Tuesday's early trading session, with the Dow Jones Industrial Average dropping more than 700 points. The market was weighed down by renewed aggressive rhetoric from former U.S. President Donald Trump regarding the acquisition of Greenland. He threatened to impose new tariffs on countries opposing the U.S. acquisition of this Danish territory and specifically threatened to raise tariffs on French wine and champagne imports to 200%. Prevailing risk-off sentiment led to a sharp spike in U.S. Treasury yields.
The Dow Jones Industrial Average fell by 723.93 points, or 1.47%, to 48,635.40; the Nasdaq Composite dropped 397.36 points, or 1.69%, to 23,118.03; and the S&P 500 index declined by 100.62 points, or 1.45%, to 6,839.39. A broad sell-off swept through U.S. markets on Tuesday, with very few stocks managing gains during early trading. Technology stocks led the declines, as they face the highest risks from investors shifting to safe-haven assets and the economic slowdown pressure induced by soaring yields. NVIDIA saw its shares fall by 3.2%. The CBOE Volatility Index (VIX), often referred to as Wall Street's "fear gauge," which measures market anxiety, surged above 19, reaching its highest level since last November. The latest tariff threats from Trump triggered a flight from U.S. assets, resulting in a sharp rise in U.S. Treasury yields and a decline in the U.S. dollar. In a post on his social media platform Truth Social on Saturday, Trump announced that exports from eight NATO member countries would face progressively increasing tariffs "until an agreement for the full and complete purchase of Greenland is reached." Trump stated that the tariffs would start at 10% beginning February 1st and would rise to 25% by June 1st. Subsequently, following reports that French President Emmanuel Macron was unwilling to join what Trump termed a "Board of Peace," Trump threatened to impose a 200% tariff on French exports of wine and champagne. Trump also criticized the United Kingdom, labeling the British government's plan to transfer sovereignty of the Chagos Islands—home to a joint UK-US military base—to Mauritius as an "incredibly stupid move." He stated this action was "another reason in a long list of national security justifications for why Greenland must be acquired." U.S. markets were closed on Monday in observance of Martin Luther King Jr. Day. Jim Reid of Deutsche Bank noted in a report Tuesday morning, "With U.S. markets closed yesterday, the full impact of the tariff threats concerning Greenland hasn't fully filtered into financial markets yet. Markets have reacted, but there is clearly room for greater volatility if the rhetoric escalates further." Reid added, "Concerns are growing in the market about potential retaliatory trade escalation from Europe, with comments from several officials becoming increasingly hawkish." Reports indicate that European leaders have called Trump's latest tariff threats "unacceptable" and are considering countermeasures—France is reportedly pushing the EU to utilize its most powerful economic deterrent threat tool, the "anti-coercion instrument." Trump, scheduled to speak at the World Economic Forum in Davos, Switzerland on Wednesday, stated he has agreed to meet with European leaders at the conference to discuss his ambitions regarding Greenland. U.S. Treasury Secretary Scott Bessent defended Trump's proposal to take over Greenland on Tuesday. Bessent argued, "It would prevent any form of actual conflict, so why not preempt the issue before it even begins?" This week, a series of companies including Netflix, Charles Schwab, Johnson & Johnson, and Intel are set to release their quarterly financial results. Corporate earnings guidance for the year will be crucial for sustaining the bullish sentiment in U.S. stocks. The S&P 500 is projected to achieve earnings growth between 12% and 15%.
