Wall Street suffered its biggest one-day decline in three months as renewed tariff threats from US President Donald Trump against Europe triggered a broad risk-off selloff.
| Photo Credit:
ANDREW KELLY
All three major Wall Street indexes
ended Tuesday with their biggest one-day drops in three months,
in a broad selloff triggered by concerns that fresh tariff
threats from President Donald Trump against Europe could signal
renewed market volatility.
The risk-off trade was pervasive, helping vault gold to
fresh record highs, and pushing up debt costs with U.S.
Treasuries wobbling under renewed selling pressure. Bitcoin,
which can find favor when traditional markets waver, fell more
than 3%.
All three U.S. equity benchmarks registered their worst
one-day performance since October 10, with both the S&P 500
and Nasdaq Composite slipping below their 50-day
moving averages.
The S&P 500 lost 143.15 points, or 2.06%, to end at
6,796.86 points, while the Nasdaq Composite gave up
561.07 points, or 2.39%, to 22,954.32. The Dow Jones Industrial
Average fell 870.74 points, or 1.76%, to 48,488.59.
UNCERTAINTY RISES
Tuesday was the first opportunity for U.S. investors to act
on Trump’s weekend comments, given the market holiday for Martin
Luther King, Jr. Day.
This included Trump saying additional 10% import tariffs
would take effect on February 1 on goods from Denmark, Norway,
Sweden, France, Germany, the Netherlands, Finland and Great
Britain — all already subject to U.S. tariffs.
The tariffs would increase to 25% on June 1 and continue
until a deal was reached for the U.S. to purchase Greenland,
Trump wrote in a post on Truth Social. Leaders of Greenland, an
autonomous territory of Denmark, and Denmark have insisted the
island is not for sale.
The reinjection of tariff threats into global markets
harkens back to April’s “Liberation Day,” when Trump’s levies on
global trade partners pushed the S&P 500 to near bear market
territory.
The CBOE Volatility Index, also known as Wall
Street’s fear gauge, spiked to 20.09 points, its highest close
since November 24.
Trading volumes were also higher: around 20.6 billion shares
changed hands on U.S. exchanges on Tuesday, up from the 17.01
billion average for the last 20 trading days.
While investor sentiment was frayed on Tuesday, the question
being asked is whether Greenland represents a knee-jerk selloff,
or something that will have longer-term implications for
markets.
Jamie Cox, managing partner at Harris Financial Group, said
he was not seeing indications investors were fleeing.
“I’m not at the point yet where I’m willing to say what is
happening with Greenland, and the resurgence of the tariff
threat back and forth, is going to precipitate a correction in
the equities markets,” he said, adding he would be surprised if
there was a 3% to 5% drop this week.
BOND MARKETS SPILLOVER
A potentially more significant action, in Cox’s eyes, would
be whether Japanese authorities intervene in financial markets.
Japanese government bonds plunged on Tuesday, sending yields to
record highs, while Tokyo stocks and the yen also fell after
Prime Minister Sanae Takaichi’s call for a snap election shook
confidence in the country’s fiscal health.
The moves helped push the cost of longer-term European
government bonds higher, while a selloff in U.S. Treasuries
was more pronounced on the long end of the curve.
Despite tariff talk, and notable bond movements, the U.S.
economy remains in a strong position.
Investors are due a host of fresh data this week on the
state of the U.S. economy, including the third-quarter U.S. GDP
update, January PMI readings and the Personal Consumption
Expenditures report, which is the Federal Reserve’s preferred
inflation gauge.
Earnings season is also kicking into higher gear, with
several industry bellwethers set to report their quarterly
earnings this week.
Among them was Netflix, which closed 0.8% lower before
reporting earnings after the bell.
Published on January 21, 2026