S&P500 and Dow Jones: Trump Tariff Threats Trigger US Stock Selloff, Tech Stocks Plunge

Trump’s Greenland Tariff Threats Trigger Sharp Market Selloff

The major U.S. stock indexes are sharply lower shortly after the cash market opening on Tuesday. Powering the risk-off session are intensifying remarks from President Trump expressing his desire to obtain Greenland from Denmark and his threat to impose new tariffs on countries opposing the sale of the Arctic island to the United States.

At 15:40 GMT, the Dow Jones Industrial Average is trading 48870.39, down 488.94 or -0.99%. The S&P 500 Index is at 6863.86, down 76.15 or -4.10% and the Nasdaq Composite is trading 23199.88, 315.507 or -1.34%.

European Leaders Push Back as Davos Meeting Looms

Since Trump made his tariff threat against eight NATO members on Saturday, he has upped his attack on France and the U.K. and has taken the stand that the move to purchase is being driven by national security reasons. European leaders have deemed Trump’s fresh tariff measures as “unacceptable”. Meanwhile, they are considering aggressive countermeasures that could have devastating impacts on growth on both sides of the Atlantic.

Trump is scheduled to speak at the World Economic Forum in Davos, Switzerland, where he is expected to meet with European leaders to present his Greenland ambitions.

Classic Risk-Off Trade Hammers Stocks, Treasuries, and Dollar

The markets are responding to Trump’s tariff threat in textbook fashion. When a clear risk-off situation creates uncertainty, investors are trained to hedge their risks, which includes selling stock, selling the dollar and selling U.S. Treasuries. The impact of a “Sell America” strategy has clear consequences: stocks drop sharply when there is blanket selling, yields rise sharply when U.S. Treasuries are dumped and the dollar falls swiftly as foreign investors bring money back home. Meanwhile, these moves help drive hard assets like gold and silver higher.

Tech and Consumer Discretionary Lead Sector Declines

The S&P 500 sectors’ performance reflects the risk-off selling pressure. With nowhere to hide as investors clean house until the problem goes away, 10 out of 11 major sectors are lower. Both Technology and Consumer Discretionary sectors are taking the biggest hits, down 2.04% and 2.08%, respectively. The lone winner is Energy, but it’s barely hanging on with a slight 0.15% gain.

Individual Stock Movers: NetApp Plunges While SanDisk Surges

The biggest losing stocks for the session are NetApp Inc (-7.232%), Hewlett-Packard Enterprises (-6.04%) and 3M Co. (-5.775%). Top-performing stocks include SanDisk (+7.5%), Intel (+5.433%) and Expand Energy Corp (4.556%).

Technical Analysis: S&P 500 Tests Critical 50-Day Moving Average

Technically, the S&P 500 Index (SPX) is sharply lower after gapping on the daily and weekly charts, setting up a test of the 50-day moving average at 6831.02. Buyers came in earlier today on a test of this indicator, producing the intraday low at 6833.29. If the intraday momentum shifts to the upside, buyers may try to fill the gap to 6885.74. Reaction to that move could set the tone into the close.

Clearly, the 50-day moving average is holding the market together so if it fails, there could be an acceleration to the downside with the next major target at 6754.13.

Bears Eye Retracement as Profit-Taking Dominates Short-Term Outlook

Looking ahead, the short-term fundamentals have turned bearish and investors have responded by taking profits and trimming positions. It doesn’t look like real shorting is taking place, but that doesn’t mean they won’t. Bearish traders may not have wanted to sell after the sharply lower opening, but they could be waiting for a retracement back to at least 6909.81.

More Information in our Economic Calendar.