Key Events
Pinned Post
Stocks and bonds looked set to claw back some of their recent losses on Wednesday, as investors hoped that President Donald Trump was blustering when he threatened to annex Greenland.
Futures tracking the Dow Jones Industrial Average climbed 111 points, or 0.2%. S&P 500 futures rose 0.4%, and contracts tied to the tech-heavy Nasdaq 100 were also up 0.4%.
The three major indexes all plummeted on Tuesday, meaning the Nasdaq is now down for the year. Investors bailed on risk assets after Trump threatened to impose tariffs on eight NATO countries until they allow his administration to acquire Greenland.
The rebound on Wednesday suggests there’s some dip-buying–and that would make a lot of sense, considering the market should be used to how Trump negotiates by now.
Last year, the president frequently threatened sizable levies, then postponed or cut them days later following a market selloff. Investors even coined an acronym to describe the pattern of behavior: TACO, which stands for Trump Always Chickens Out.
“My working assumption here is that there is no need for hysteria, and that Trump’s tariff threats are a way of obtaining negotiating leverage, with the ‘escalate to de-escalate’ playbook being in effect once more,” said Michael Brown, strategist at the foreign-exchange brokerage Pepperstone.
“I fully expect progress towards finding a ‘middle ground’ this week, and an eventual walk back of these threats – another ‘TACO’ moment, if you will. With that in mind, buying the equity dip remains my preferred play,” he added.
Bonds were also rallying on Wednesday. The yield on the 10-year note fell 3 basis points to 4.27%.
Speaking at the World Economic Forum’s annual meeting in Davos, Treasury Secretary Scott Bessent blamed a recent surge in yields on a brutal selloff in Japanese bonds, rather than the “sell America” trade. The yield on the 40-year Japanese government bond fell 16 basis points on Wednesday, having hit a record high the previous session.
The dollar held steady against a weighted basket of its peers, having dropped 0.5% the previous session.
The rebound in stocks didn’t dampen investors’ appetite for precious metals, as gold futures surged 2.1% to a record $4,864 an ounce. Bitcoin, the large-cap cryptocurrency that tends to reflect risk sentiment, dropped 2.2% over the past 24 hours to $89,013.
