A risk-off mood gripped markets with US stocks falling the most since November after a weekend of bombast from President Donald Trump over the future of Greenland threatened to spark a trade war with the European Union.
S&P 500 Index fell 1.3% at 9:45 a.m. in New York, erasing most of its year-to-date gains. The Nasdaq 100 slid 1.4%. Wall Street’s complacency was shaken as the CBOE Volatility Index climbed above 20 for the first time since November, gold rallied, Treasuries fell and the dollar retreated.
Volatility rattled financial markets after President Trump continued to insist the US should control the semi-autonomous island owned by Denmark, a staunch NATO ally. His threat to impose 10% tariffs on European nations that don’t acquiesce was met with outrage across Europe. Leaders there planned an emergency summit to discuss options, including tariffs on €93 billion ($109 billion) of US goods.
“The market reaction is appropriate given the rapidly rising uncertainty,” said Michael O’Rourke, chief market strategist at JonesTrading. “The thought of forcibly coercing an ally to yield sovereign territory will incur geopolitical damage that will take years to repair.”
Shares of French luxury group LVMH extended a selloff after the US president signaled he could impose a 200% tariff on French wines and champagne.
If the tariffs go into effect or the US illegally annexes Greenland, the drop in stocks should be much more severe, O’Rourke added, noting the 11% drop over three days when Trump introduced his tariffs in April.
“Once again we risk heading into unchartered territory,” he said.
The S&P 500 Index wiped out most of this year’s with investors bracing for a busy stretch of potential catalysts, including the president’s speech at the World Economic Forum in Davos. Traders are also watching the US Supreme Court’s expected decision on the legality of key elements of Trump’s trade agenda, and a potential announcement of the next Federal Reserve chair, which could come as soon as next week, according to the Treasury Secretary Scott Bessent.
Bond markets also came under pressure. Longer-dated US Treasury yields climbed after turmoil in Japan’s debt market sent shockwaves across global rates. The yield on the 30-year Treasury rose about eight basis points to 4.92%, tracking a selloff that pushed Japan’s 40-year yield to a record high as investors balked at Prime Minister Sanae Takaichi’s campaign proposals to cut food taxes.
Safe-haven assets outperformed amid the volatility. Gold surged past $4,700 an ounce for the first time, while silver also notched a record. The dollar weakened, and the Swiss franc posted its biggest two-day advance since April.
Cryptocurrencies also fell sharply as risk assets slipped and haven demand strengthened. Bitcoin declined by more than 2% for a second straight day to below $91,000.
The latest market turmoil will test elevated risk appetites. Before this weekend, investors were the most bullish in nearly five years, while demand for equity downside protection was at its lowest since 2018, according to Bank of America Corp.’s latest fund manager survey.
As earnings season picks up steam, expectations remain high. Analysts forecast fourth-quarter S&P 500 earnings growth of about 8%, according to Bloomberg Intelligence, with investors focused on themes including artificial intelligence spending, oil-market volatility and tariff risks. Of the 33 companies that have reported so far, 88% have beaten estimates.
In corporate news, Netflix Inc. agreed to an amended all-cash deal to acquire Warner Bros. Discovery Inc.’s studio and streaming assets as it competes with Paramount Skydance Corp. for one of Hollywood’s most storied entertainment franchises. Netflix is scheduled to report earnings after the close Tuesday with investors being concerned about Netflix’s slowing flow of subscribers and the sustainability of its growth.
3M Co. shares fell after the industrial company gave an outlook for this year’s adjusted earnings per share with a midpoint below what analysts expected. U.S. Bancorp reported profit and a forecast for revenue that beat analysts’ estimates. And ServiceNow Inc. shares edged higher as the software company and OpenAI signed a multi-year agreement that will allow customers to use OpenAI models and custom AI capabilities.
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Read more articles by Matthew Griffin, Natalia Kniazhevich
