By Natalia Kniazhevich, Bloomberg
US stocks rallied after US President Donald Trump said he didn’t want to use excessive force to acquire Greenland.
The S&P 500 Index rose 0.7% as of 11:38 a.m. in New York. The rebound followed the benchmark’s slump in the prior session on worries over the risk of a full-blown trade war with Europe as Trump steps up his push to take over Greenland. The Nasdaq 100 jumped 0.9% and Russell 2000 Index climbed 1%. Wall Street’s fear gauge, the Cboe Volatility Index or VIX, briefly dropped below 18.
In a speech to the World Economic Forum in Davos Trump reiterated that the US needs to own Greenland for security reasons and called for “immediate” negotiations to acquire Greenland before saying the US doesn’t want to use excessive force to get the country.
“By backing off his immediate threats to use military force in Greenland, this removed the most glaring current concern,” said Steve Sosnick, chief strategist at Interactive Brokers. “As a result, the resolute dip buyers were once again vindicated, and the inevitable rally chasers joined the party afterwards,”
Meanwhile, a trade deal between the US and European Union is on hold after the European Parliament decided to freeze a ratification vote in response to President Trump’s escalating threats to seize Greenland.
Trump was also optimistic on equity gains, saying the stock market will double while reiterating he would seek a one-year cap on credit card interest rates at 10%.
To Jamie Dimon, JPMorgan Chase & Co.’s chief executive officer, the proposed cap would spell “economic disaster” for the US, forcing banks to pull credit lines for many Americans.
On the economic front, pending sales of US existing homes fell in December by the most since April 2020, an unusually large drop after the housing market appeared to be gaining some momentum.
Global bonds found firmer footing after long-dated Japanese debt clawed back some losses following Tuesday’s plunge. The move helped steady Treasuries, with 30-year US yields two basis points lower, shorter maturities also edged lower.
“The bond market remains on tenterhooks probably until we assess the outcome of the emergency EU summit and the BOJ meeting later in the week,” said Frank Monkam, head of cross asset macro strategy trading at Buffalo Bayou Commodities.
Some strategists saw yesterday’s pullback as a buying opportunity, noting that risk assets have historically looked through geopolitical flare-ups unless they trigger a sustained surge in oil prices.
For some nine months now, the TACO trade has proven a winner. Short for “Trump Always Chickens Out,” it emerged in the wake of the president’s global tariff rollout — and rollback — in April. It quickly became the rallying cry for investors tuning out the more extreme White House threats as they kept buying risky assets.
“You can’t take any of these things at face value, said Cole Smead, CEO and president of Smead Capital Management, referring to Tuesday’s selloff driven by Donald Trump’s rhetoric. “Investors that have taken direct meaning to these have been hurting themselves.”
Haven demand remained robust. Gold climbed to another record high while silver also advanced.
Equity rotation continued to define trading. The Russell 2000 is beating the S&P 500 for a 13th straight day. “Our macro desk continues to see strong demand for small caps,” Goldman traders wrote in a note Tuesday.
Still, technical signals are flashing caution. Analysts at Tier1Alpha warned the S&P 500 is approaching what’s known as a negative gamma zone, a setup that can amplify market swings as dealer hedging reinforces prevailing momentum, a risk heightened as buyback blackout periods near.
In corporate news, Netflix Inc. shares fell after warning that higher content spending and costs tied to closing its deal with Warner Bros. Discovery Inc. will weigh on results. Johnson & Johnson topped fourth-quarter sales estimates on strong demand for newer cancer therapies and issued an upbeat 2026 outlook, even after agreeing to discounts on some drugs under a deal with the White House.
Kraft Heinz Co. shares slid after disclosing that up to 325 million shares held by Berkshire Hathaway Inc. were registered for potential sale. And United Airlines Holdings Inc. shares rose after earnings beat Wall Street estimates for the fourth quarter and the firm projected a strong 2026.
Energy-related shares also in focus after US natural gas futures jumped as much as 27%, driven by forecasts for a prolonged cold spell across large parts of the country. Separately, the International Energy Agency lifted its outlook for global oil-demand growth in 2026 for a third straight month, paring expectations for a supply glut.
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