Stocks Rally as Greenland Tensions Ease

The S&P 500 Index ($SPX) (SPY) today is up +1.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.97%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.33%.  March E-mini S&P futures (ESH26) are up +1.03%, and March E-mini Nasdaq futures (NQH26) are up +1.32%.

Stock indexes are moving sharply higher today as rebound following Tuesday’s rout.  Stocks are recovering today after President Trump said he is seeking "immediate negotiations" to acquire Greenland, calling the island part of North America, and that he doesn't want to use excessive force to get Greenland. He said Tuesday’s dip in equity markets was “peanuts” and that the US stock market will soon double.   

Stocks sold off sharply on Tuesday as rising geopolitical tensions between the US and Europe over control of Greenland sparked a risk-off mood in asset markets.  President Trump’s push to take over Greenland is reviving fears of trade confrontations between the US and its European allies.  President Trump over the weekend announced a 10% tariff on goods from eight European countries starting February 1, rising to 25% in June, unless there’s a deal for the “purchase of Greenland.”

Lower bond yields today are also helping a recovery in stocks.  The 10-year T-note yield is down -2 bp to 4.27% after rising to a 4.75-month high of 4.31% on Tuesday, driven by concern about an independent Fed and negative carryover from soaring Japanese government bond yields.  Japan’s 10-year JGB bond yield fell to 2.285% today, falling back from Tuesday’s 27-year high of 2.359%. 

Gold prices (GCG26) rallied another 1% today, hitting a new record high, and are lifting mining stocks amid the Greenland crisis, which is prompting safe-haven buying of precious metals. Also, concerns that Japan's expansionary fiscal policies will lead to soaring deficits are boosting demand for precious metals as a store of value. 

Natural-gas prices (NGG26) are up more than +21% today to a 6-week high, adding to Tuesday’s +26% surge, and are boosting nat-gas producers. An Arctic cold front is set to bring cold temperatures to much of the eastern US, boosting heating demand and potentially leading to freeze-offs in wells and disrupting US nat-gas production.  

US MBA mortgage applications rose +14.1% in the week ended January 16, with the purchase mortgage sub-index up +5.1% and the refinancing mortgage sub-index up +20.4%.  The average 30-year fixed rate mortgage fell -2 bp to 6.16% from 6.18% in the prior week.

US Dec pending home sales fell -9.3% m/m, weaker than expectations of -0.3% m/m and the biggest decline in 5.5 years.

US Oct construction spending rose +0.5% m/m, stronger than expectations of +0.1% m/m.

The market’s focus this week will be on economic news and any fresh tariff developments, the next Fed Chair, and Greenland.  On Thursday, initial weekly unemployment claims are expected to climb by +11,000 to 209,000.  Also, Q3 GDP is expected to be unrevised at +4.3% (q/q annualized).  In addition, Nov personal spending is expected to be up +0.5% m/m, and Nov personal income is expected to rise +0.4% m/m.  Finally, the Nov core PCE price index (the Fed’s preferred inflation gauge) is expected to rise by +0.2% m/m and +2.8% y/y.  On Friday, the Jan S&P US manufacturing PMI is expected to be up by +0.2 to 52.0.  Also, the final University of Michigan Jan US consumer sentiment index is expected to be unrevised at 54.0. 

Q4 earnings season begins in earnest this week and, so far, has been a positive factor for stocks, with 88% of the 33 S&P 500 companies that have reported beating expectations.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The Supreme Court on Tuesday did not issue a ruling on challenges to President Trump’s reciprocal tariffs.  The court did not say when it will issue its next opinions, meaning it will likely be at least another month before ruling on the tariffs, as the court begins a four-week recess. 

The markets are discounting the odds to 5% for a -25 bp rate cut at the FOMC’s next meeting on January 27-28.

Overseas stock markets are mixed today.  The Euro Stoxx 50 is up by +0.07%.  China’s Shanghai Composite closed up by +0.08%.  Japan’s Nikkei Stock 225 fell to a 1.5-week low and closed down by -0.41%.

Interest Rates

March 10-year T-notes (ZNH6) today are up by +3 ticks.  The 10-year T-note yield is down by -2.0 bp to 4.273%.  T-note prices today are slightly higher as they recover some of Tuesday’s sharp losses.  Tensions between the US and Europe over Greenland are boosting safe-haven demand for T-notes, as President Trump's threats to increase tariffs on Europe could prompt tit-for-tat retaliation that hinders economic growth.  T-notes remained higher after the US Dec pending home sales fell by the most in 5.5 years. 

Gains in T-notes are limited amid rising inflation expectations, as the 10-year breakeven inflation rate rose to a 3.25-month high of 2.345% today. Also, supply pressures are weighing on T-notes as the Treasury will auction $13 billion of 20-year T-bonds later today. 

T-notes are also under pressure after President Trump last Friday expressed reluctance to name Keven Hassett as the next Fed Chair and said he would prefer to keep him as National Economic Council director.  The markets saw Hassett as the most dovish candidate and the top contender for the Fed Chair nomination, so nominating someone like Kevin Warsh, a known hawk and the second-most-likely Fed Chair candidate, would be bearish for T-note prices.

European government bond yields are mixed today.  The 10-year German bund yield is up +1.9 bp to 2.878%.  The 10-year UK gilt yield is down -0.9 bp to 4.449%.

ECB President Lagarde said another volley of tariffs from US President Trump would have only a "minor" impact on inflation in Europe.  She added that what is more important than the tariffs themselves is the rising uncertainty caused by the tariff threats.

UK Dec CPI rose +3.4% y/y, stronger than expectations of +3.3% y/y. Dec core CPI rose +3.2% y/y, weaker than expectations of +3.3% y/y.

Swaps are discounting a 0% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.

US Stock Movers

Chip makers are moving higher today, boosting the overall market.  Intel (INTC) is up more than +10% to lead gainers in the S&P 500 and Nasdaq 100, and ARM Holdings Plc (ARM) and Advanced Micro Devices (AMD) are up more than +8%.  Also, Micron Technology (MU) is up more than +6%, and Marvell Technology (MRVL) and Microchip Technology (MCHP) are up more than +4%.  In addition, Analog Devices (ADI) is up more than +3%, and Nvidia (NVDA) is up more than +2%. 

US natural gas-producing stocks are rallying for the second day today as the price of nat-gas is up more than +21% at a 6-week high, adding to Tuesday’s +26% surge.  EQT Corp (EQT) is up more than +5%.  Also, Expand Energy (EXE), Antero Resources (AR), and Range Resources (RRC) are up more than +3%.  EOG Resources (EOG), CNX Resources (CNX), and Coterra Energy (CTRA) are up more than +2%.

Progressive Software (PRGS) is up more than +18% after forecasting full-year adjusted EPS of $5.82 to $5.96, stronger than the consensus of $5.66.

Nathan’s Famous (NATH) is up more than +8% after Smithfield Foods agreed to buy the company for $102 a share.   

Teledyne Technologies (TDY) is up more than +8% after reporting Q1 net sales of $1.61 billion, above the consensus of $1.57 billion.

Datadog (DDOG) is up more than +6% after Bernstein said it was positive on the company, assigning an outperform rating and a $180 price target. 

Citizens Financial Group (CFG) is up more than +5% after reporting Q4 total deposits of $183.3 billion, above the consensus of $180.35 billion.

Oklo Inc (OKLO) is up more than +5% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $127.

Albemarle (ALB) is up by more than +3% after Truist Securities upgraded the stock to buy from hold with a price target of $205.

United Airlines Holdings (UAL) is up more than +2% after reporting Q4 adjusted EPS of $3.10, better than the consensus of $2.92.

Kraft Heinz (KHC) is down more than -5% to lead losers in the S&P 500 and Nasdaq 100 after registering 325,442,152 common shares held by Berkshire Hathaway for potential sale. 

Netflix (NFLX) is down more than -4% after forecasting a full-year operating margin of 31.5%, below the consensus of 32.4%.

Dollar Tree (DLTR) is down more than -3% after BNP Paribas SA downgraded the stock to underperform from neutral with a price target of $87. 

Earnings Reports(1/21/2026)

Charles Schwab Corp/The (SCHW), Citizens Financial Group Inc (CFG), Halliburton Co (HAL), Johnson & Johnson (JNJ), Kinder Morgan Inc (KMI), Prologis Inc (PLD), TE Connectivity PLC (TEL), Teledyne Technologies Inc (TDY), Travelers Cos Inc/The (TRV), Truist Financial Corp (TFC).