S&P 500 showed the worst decline since October. The market is worried about duties due to Greenland

Key U.S. stock indices fell sharply in the first trading after the long weekend: each showed the strongest decline since October. The S&P 500 and Nasdaq Composite lost more than 2% each. The sell-off came after Donald Trump's decision to impose duties on goods from eight European countries over Greenland. Investors are worried about using the duties as a weapon, as well as a possible response from the European Union, a major holder of U.S. debt.

- The broad market index S&P 500 declined by 2.06% at the end of trading on January 20. As a result, the index was down 0.7% relative to the beginning of 2026.

- The blue-chip index Dow Jones Industrial Average lost 1.76%.

- The tech-heavy Nasdaq Composite was down 2.39%. The Nasdaq was also in negative territory relative to the beginning of the year, down 1.2%.

- The Russell 2000 index of small-capitalization companies fell 1.2%.

- The "Wall Street Fear Index" VIX jumped by 6.6%: it amounted to 20.09 points. This is just above the border of the "alarm" zone indicating high volatility.

Among the main victims of the sell-off were the shares of American retailers: thus, Amazon securities fell by 3.4%, and Walmart securities - by 0.83%, although in the course of trading they updated the record for the entire time of circulation on the stock exchange.

Tuesday was the worst day in recent months also for long-term bonds of the U.S. Ministry of Finance. The yield of 10-year treasuries reached 4.31%, and ended trading at the maximum for five months at 4.29%, writes MarketWatch. Sale of 30-year bonds became the strongest since July 11, the yield at the close was 4.92% - the maximum for more than four months.

When you consider the average returns of major exchange-traded funds tracking U.S. stocks, U.S. Treasury Department bonds, corporate bonds and the value of bitcoin, the Jan. 20 trading session was the worst since April, when U.S. President Donald Trump first announced trade duties, Bloomberg noted.

Trump on January 17 announced the introduction of a 10 percent duty on February 1 against European countries that supported Denmark and opposed his attempts to gain control over Greenland. The duty will rise to 25 percent on June 1.

"[The] 'Sell American' narrative is back in a new form. We entered this year with the market convinced that trade policy risks are the story of 2025. Obviously, that's something we're going to have to deal with in 2026," agreed HB Wealth senior market strategist Gina Martin Adams, as quoted by MarketWatch.

Duties in and of themselves are nothing new, and the Trump administration's interest in Greenland is nothing new either, but turning duties into a weapon in the short term to achieve a non-economic or related economic goal is something new, Wealthspire investment director Brad Long told CNBC.

"It's 'sell American' again as part of a much broader global risk-aversion. Global investors are looking to reduce or hedge their exposure to a volatile and unreliable US. What remains unknown is the magnitude and duration of this dynamic," said Evercore ISI vice chairman Krishna Guha, as quoted by Bloomberg.

Investors can expect a "fairly limited direct impact" of Trump's duties on U.S. stock indexes, but they should keep an eye on the European Union's possible response, says Morgan Stanley senior U.S. equity strategist Mike Wilson. His words are reported by MarketWatch. "The more notable risk is whether the EU activates its Anti-Coercion Instrument (ACI. - Oninvest) and focuses on services, which could pose more of a threat to U.S. mega caps," the analyst said. "ACI may include instruments broader than duties, such as investment restrictions, taxation of US assets and services, including digital services, and so on," added Goldman Sachs senior economist for Europe Sven Jari Sten.

Yields on 10-year treasuries jumped Tuesday in part because of "growing rumors that Europeans may use U.S. assets they own as weapons [...] to respond to Trump's aggressive trade and geopolitical actions," said Swissquote analyst Ipek Ozkardeskaya in a note cited by MarketWatch.

Europeans own roughly $10 trillion in U.S. assets, including $6 trillion in securities. Selling those assets would "pull the rug out from under the feet of U.S. markets," potentially getting Trump's attention, but it would require European investors to "voluntarily accept financial loss for the sake of punishing the U.S.," which is hard to imagine right now, Ozkardeskaya added.

Danish pension fund AkademikerPension plans to get rid of the treasuries it owns by the end of January, Anders Schelde, the fund's investment director, told Bloomberg. Trump's actions create risks that are too big to ignore, he added.

This article was AI-translated and verified by a human editor