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Stocks looked set to tumble on Tuesday as investors worried about President Donald Trump’s plan to impose tariffs on eight NATO countries, unless they allow his administration to acquire Greenland.
Futures tracking the Dow Jones Industrial Average dropped 798 points, or 1.6%. S&P 500 futures slumped 1.8%, and contracts tied to the tech-heavy Nasdaq 100 plunged 2.2%.
Bonds were also selling off. The yield on the 10-year Treasury note jumped 6 basis points to 4.29%, and the 30-year yield surged 9 basis points to 4.93%.
U.S. equity and bond markets were closed for Martin Luther King Jr. Day on Monday, but shares in Asia and Europe fell following Trump’s tariff threats. Most Asian indexes closed flat on Tuesday, but European stocks continued to fall, with the continent’s flagship Stoxx 600 index down 0.8% in early trading.
“With the U.S. off yesterday the implications of the tariff threats over Greenland had yet to fully percolate through financial markets,” Deutsche Bank macro strategist Jim Reid said.
“It’s worth keeping an eye on the demand for U.S. assets as a barometer for how aggressive the U.S. might be on this policy,” he added, noting that a sharp selloff in long bonds did contribute to the Trump administration’s decision to water down some of the sweeping levies it rolled out in early April.
Tariffs are likely to be the market’s main focus this week, particularly given they will get plenty of airtime at the World Economic Forum’s annual meeting in Davos.
Treasury Secretary Scott Bessent dismissed concerns of an extended trade war on Tuesday. The White House has said that Trump will give a major speech on affordability at Davos, likely on Wednesday.
Gold futures surged 2.9% to $4,728 an ounce on Tuesday, as the uncertainty about trade sent investors piling into safe-haven assets. The dollar dropped 0.8% against a weighted basket of its peers as the “sell America” trade gathered steam.
Bitcoin, the large-cap cryptocurrency that tends to reflect risk sentiment, dropped 2.7% over the past 24 hours to $90,754.
