U.S. stocks recover half of the prior day’s plunge after Trump calls off Greenland-related tariffs
The U.S. stock market experienced a significant rebound on Wednesday, recovering from its worst day since October, following President Donald Trump's announcement regarding Greenland. Trump stated that he had reached a deal with Greenland, an island he has long desired, and would not impose tariffs on several European countries as previously threatened.
The S&P 500 index surged by 1.2%, with Trump praising the potential deal as beneficial for the United States and its allies in the North Atlantic region. This positive news triggered an immediate upward movement in the stock market, which had earlier found temporary relief when Trump softened his rhetoric and assured European business and government leaders that he would not resort to force to acquire 'the piece of ice.'
The de-escalation of tensions allowed the S&P 500 to recover over half of its previous day's decline of 2.1%, bringing it closer to its all-time high set earlier in the month. The Dow Jones Industrial Average rose by 588 points, or 1.2%, and the Nasdaq composite climbed 1.2%.
Treasury yields in the bond market also showed signs of reduced investor anxiety, easing from previous levels. This positive sentiment was further bolstered by a calming of yields in Japan's volatile bond market. Additionally, the U.S. dollar's value partially recovered from its previous decline against other currencies.
Trump acknowledged that the U.S. stock market had experienced a downturn on Tuesday due to his interest in Greenland, but he downplayed its significance, comparing it to 'peanuts' compared to the market's performance in his first year of the second term. He predicted further growth in the future.
Trump's history of making bold threats that cause market slumps is notable, but he often retreats and negotiates deals that are considered less detrimental to the economy or inflation. This pattern has led to the acronym 'TACO' (Trump Always Chickens Out) among financial markets. However, Trump has also successfully struck deals that were initially deemed unlikely, such as his high-tariff announcement on 'Liberation Day,' which eventually resulted in trade agreements with major global economies.
Halliburton, an oil field services company, led the U.S. stock market's recovery on Wednesday, rising 4.1% after reporting stronger-than-expected profits for the latest quarter. United Airlines also contributed, climbing 2.2% due to better-than-forecasted profits for the final quarter of 2025, with CEO Scott Kirby highlighting continued strong revenue momentum into 2026.
These gains, however, were partially offset by a 2.2% drop in Netflix's stock, despite the company reporting stronger-than-expected profits. Investors focused on the streaming service's slowing subscriber growth and lower-than-expected profit forecasts for the current quarter.
Kraft Heinz's stock sank 5.7% after Berkshire Hathaway expressed interest in selling its 325 million shares in the food giant, which was co-created by former CEO Warren Buffett in 2015. Berkshire had previously taken a significant write-down on its Kraft-Heinz stake, and Buffett had expressed disappointment in Kraft Heinz's company split plan, leading to the resignation of Berkshire's representatives from the Kraft board.
Overall, the S&P 500 rose by 78.76 points, closing at 6,875.62. The Dow Jones Industrial Average climbed 588.64 points to 49,077.23, and the Nasdaq composite gained 270.50 points to 23,224.82.
In the bond market, the 10-year Treasury yield eased to 4.25% from 4.30% on Tuesday, almost returning to its Friday level of 4.24%.
However, Trump's threat to impose 10% tariffs on Denmark, Norway, Sweden, Germany, France, the UK, the Netherlands, and Finland for opposing U.S. control of Greenland, in addition to a 15% tariff under a pending EU trade agreement, could have significant implications for global markets.
International stock markets displayed mixed results, with modest movements in Europe and Asia. Japan's Nikkei 225 index slipped by 0.4%, and the country's prime minister, Sanae Takaichi, called for a snap election on February 8, causing yields on long-term government bonds to reach record levels and raising concerns in global financial markets. Takaichi's expected tax cuts, spending boosts, and increased debt could have further economic implications.
