Trump's Greenland Obsession Is Costing US Market; DJIA, Nasdaq & S&P 500 Crashes Worst Since Oct; Outlook

Wall Street is bleeding as US President Donald Trump's obsession over Greenland intensifies. He has threatened more tariffs on countries that oppose his takeover of the Danish territory. But European Unions are not ready to blink; they vow an 'unflinching' response to Trump's tactics. Denmark has already increased its military presence in Greenland. But amidst this geopolitical tension, the US market just recorded its worst day since October last year.

The situation between the EU and Trump is not limited to claiming Greenland; it has gone beyond a global trade crisis.

On January 20, the Dow Jones crashed nearly 871 points, while the Nasdaq Composite and S&P 500 indexes dropped by over 2% each. Not just that the US Treasury yield skyrocketed, but the US dollar weakened.

The Chicago Board Options Exchange's CBOE Volatility Index breached above 20.31%, registering nearly 8% jump on Tuesday. During the trading session, this Wall Street's 'fear-gauge' spiked to as much as 20.99.

Dow Jones + Nasdaq + S&P 500

All three indices of Wall Street were on a hot bearish bed. The Dow Jones Industrial Average (DJIA) closed at 48,488.59, down by 870.74 points or 1.76%. While S&P 500 plunged by 143.15 points or 2.06% to close 6,796.86. The tech-heavy index Nasdaq Composite dropped the most in percentage terms, to end at 22,954.32 which was a sharp downfall of 561.06 points or 2.4%.

All three marked their worst daily performance since October 10.

"Risk appetite is waning, and the 'sell America trade' is picking up momentum," said Liz Ann Sonders, chief investment strategist at the Schwab Center for Financial Research.

"The sell-off isn't confined to U.S. markets-European/Asian markets are also weak as traders fret over possible trade retaliation and broader geopolitical headwinds tied to diplomatic tensions," she added.

US Treasury Yield + US Dollar + Crude Oil

The 10-year US treasury yield climbed by 7 basis points to 4.29%, making its highest level since August. This performance comes after the Japanese government triggered a global bond sell-off. Japanese Prime Minister Sanae Takaichi has declared to dissolve parliament and would hold a snap election, campaigning on tax cuts for food. Investors fear this could impact Japan's fiscal position.

However, this was not the case with US dollar who continued to weaken for the third consecutive session, due to US and EU row which continues to escalate. US dollar slipped to around 98.5.

Following the trend in dollar and stocks, US' WTI crude oil nosedived by over 1% to 59.5 per barrel in the early hours of Wednesday. WTI erases its previous session's gains.

As per Trading Economics, US crude and gasoline inventories were expected to rise last week, while distillate stockpiles were seen falling ahead of the EIA data. Offsetting some losses, Kazakhstan, an OPEC+ member, temporarily halted output at the Tengiz and Korolev fields, with production likely offline for 7-10 days due to power issues, though the disruption is temporary. Elsewhere, US forces seized a seventh Venezuela-linked oil tanker as part of an intensified effort to enforce sanctions and disrupt the country's oil trade.

Brent Crude is down by nearly 1.2% to trade around $64.2 per barrel.

Trump Vs European Union:

In the Trump versus EU, the latest statement comes from European Commission President Ursula von der Leyen who said that the EU has vowed an unflinching response to Trump's rising threats on Greenland.

During World Economic Forum, she said, "Plunging us into a downward spiral would only aid the very adversaries we are both so committed to keeping out of the strategic landscape. So our response will be unflinching, united and proportional."

Earlier, in the weekend, Trump announced he will start imposing 10% import tariffs on countries opposing the sale of Greenland from February 1, 2026. That tariff to could rise to 25% from June 1, 2026.

The 47th President of USA, also threatened to slap 200% tariff on French wines and champagne. This came after reports said that France's president Emmanuel Macron is likely not to join Trump's Board of Peace for Gaza.

Several European Union countries have already threatened to suspend previously agreed upon trade deals with USA . Also, the Danish pension operator Akademiker Pension has announced their plans to exit approximately $100 million Treasury position by end of January.

While market is battered by the Greenland chaos, to understand the near term and long term prospects for stocks looks gloomy.

US Market Outlook:

"We need more details. We have seen many tariff threats recently, with not all of them being carried out," said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, or SCFR.

"That's not to say that the Greenland developments don't matter. If the proposed tariff increases on our EU partners do kick in, that would be a fairly dramatic escalation in the trade dispute with the EU. We just find ourselves in a position of having limited information at this point; and so does the market, which makes the reaction difficult to extrapolate," Gordon added.

Going ahead, investors will eye a looming U.S. Supreme Court decision on whether the executive branch can legally impose these wide-range of tariffs under the International Emergency Economic Powers Act.

According to Gordon, this decision has the potential to add another kink in the process of assessing what the state of trade policy will look like moving forward.

Noteworthily, Schwab report also said, earnings and economic data could be overshadowed by ongoing trade developments between the EU and the U.S. as the week goes on.

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