U.S. stocks plunged Tuesday in the worst trading session since Oct. 10, with the Dow Jones Industrial Average dropping more than 870 points as President Donald Trump’s threats to impose tariffs on European allies over Greenland raised fears of an expanding trade war.
The Dow closed down 870.74 points, or 1.76%, to finish at 48,488.59. The broader S&P 500 fell 2.06% to 6,796.86, while the tech-heavy Nasdaq Composite dropped 2.39% to 22,954.32. The sharp decline completely erased year-to-date gains for both the S&P 500 and Nasdaq.
Greenland Dispute Triggers Market Selloff
The market turmoil followed Trump’s announcement in a Truth Social post on Saturday that eight NATO members’ U.S. imports will face escalating tariffs “until such time as a Deal is reached for the Complete and Total purchase of Greenland.” The tariffs will start at 10% on Feb. 1 and rise to 25% on June 1, Trump said.
On Monday, Trump threatened to impose 200% tariffs on French wines and champagne amid reports that the country’s president, Emmanuel Macron, is unwilling to join his so-called Board of Peace.
Analysts described the resulting investor behavior as a “Sell America” movement. The dollar index fell 0.8%, posting its worst day since August, while the euro rose 0.65% against the dollar.
“This is ’Sell America’ again within a much broader global risk off,” Krisha Guha, vice chairman at Evercore ISI, said in a note to clients, per CNBC. “The fact that the dollar is falling while the euro is rising on the crisis says global investors at the margin are looking to reduce or hedge their exposure to a volatile and unreliable US.”
Bond Markets Also Under Pressure
U.S. Treasury prices fell sharply, sending yields to their highest levels since September. The 10-year Treasury yield climbed to 4.29%, while the 30-year bond yield jumped to 4.92%. The selloff was compounded by turmoil in Japanese bond markets, where Prime Minister Sanae Takaichi’s proposal to cut taxes despite massive government debt sent yields surging higher.
Treasury Secretary Scott Bessent attempted to calm markets during a press briefing in Davos, Switzerland. “This is the same kind of hysteria we heard on April 2 — there was a panic,” Bessent said. “What I’m urging everyone here to do is sit back, take a deep breath, and let things play out.”
Safe Haven Assets Surge
Investors seeking shelter from the stock market turmoil drove precious metals to new heights. Gold futures climbed to a record high above $4,750 per ounce, gaining 3.6% on the day. Silver also jumped 6.3% and briefly hit a record above $95 per ounce.
“The debasement trade is on fire and precious metals are the outlet,” Robin Brooks, a senior fellow at the Brookings Institution, wrote on X.
Tech Sector Takes Heavy Hit
Technology stocks led the market decline, with Amazon, Nvidia, Apple and Salesforce all falling at least 3%. Apple shares dropped after Citigroup analyst Atif Malik cut his price target on the stock to $315 from $330, citing rising memory chip costs.
The Cboe Volatility Index, often called Wall Street’s “fear gauge,” rose above 20 for the first time since November and settled at 20.68. A reading above 20 signals elevated volatility.
Europe Considers Retaliation
European leaders are discussing countermeasures to Trump’s tariff threats. The bloc could also deploy an “anti-coercion instrument” with a potential fallout of some $8 trillion for U.S. assets, according to market reports.
Meanwhile, a Bank of America fund manager survey conducted before the Greenland crisis escalated showed investors were the most bullish since July 2021 and had reduced protection against stock market corrections to eight-year lows, Bloomberg reported, leaving many portfolios exposed to the sudden downturn.
Eyes Turn to Davos
Trump is scheduled to address the World Economic Forum in Davos on Wednesday and hold meetings with other countries over Greenland. When asked during a White House press conference Tuesday how far he would go to acquire the Arctic territory, Trump replied: “You’ll find out.”
Investors will be watching closely for any signs the president might soften his stance or seek a diplomatic compromise with European leaders.
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