The S&P 500 fell enough to wipe out its year-to-date gains for 2026 as investors reacted to rising tensions between the United States and European allies, driven by renewed trade threats linked to the dispute over Greenland. The selloff spread across major asset classes, pulling down stocks globally while boosting demand for traditional safe-haven assets.
What triggered the market move
Market volatility increased after U.S. President Donald Trump escalated rhetoric around Greenland and threatened additional tariffs against several European countries. The episode revived concerns over policy uncertainty and potential trade disruption between the U.S. and Europe, two of the world’s largest economic blocs.
Reuters reported that the shift fueled a broader “Sell America” mood in markets, weighing on U.S. equity futures and the dollar at the same time.
S&P 500 and U.S. stocks slide, wiping out early-2026 gains
U.S. equities weakened sharply, with S&P 500 futures down more than 1% at one stage, leaving the index on track to erase its 2026 gains. Technology-heavy contracts also fell, reflecting broad risk reduction across major sectors.
The selling pressure was not limited to one segment of the market, with declines seen across the Dow-linked and Nasdaq-linked contracts as well.
Europe equities drop as tariff risk hits exporters
European markets declined alongside U.S. equities, led by export-sensitive segments. Reuters reported that the STOXX 600 logged its biggest drop in about two months, with luxury and auto-related shares among the hardest hit.
The tariff focus increased attention on cross-border supply chains and revenue exposure, especially for companies dependent on U.S. consumer demand or transatlantic trade flows.
Global markets react: equities down, safe havens bid
Across global markets, investors shifted toward safer assets. Gold climbed sharply as equity risk increased, while the Swiss franc gained during the session, consistent with risk-off trading conditions.
The U.S. dollar also weakened for a second straight day, according to Reuters, reflecting shifting capital flows and uncertainty around policy direction.
Bonds and rates: U.S. yields rise while Japan’s debt selloff adds pressure
U.S. Treasury yields moved higher, with Reuters citing the 10-year yield at around a four-month high near 4.265%. The move suggested markets were also recalibrating for changing policy and fiscal assumptions amid political risk.
At the same time, selling in Japanese government bonds contributed to broader volatility in global fixed income, reinforcing the risk-off tone across regions.
Policy backdrop: tariffs, diplomacy, and Davos in focus
The tariff threats and Greenland dispute surfaced as global leaders and finance officials convened in Davos, placing U.S.-Europe trade relations and geopolitical alignment under renewed scrutiny.
U.S. Treasury Secretary Scott Bessent attempted to calm markets by emphasizing continued strong relationships with European counterparts, according to the Associated Press.
Why the “Trump-Europe clash” mattered to investors
Trade risk and corporate earnings sensitivity
Large-cap U.S. and European companies have significant cross-border exposure through sales, sourcing, and investment. Any tariff escalation can affect input costs, pricing power, and demand, particularly for multinational firms in industrials, autos, consumer goods, and luxury categories.
Currency and capital-flow volatility
The simultaneous drop in equities and the U.S. dollar signaled broader uncertainty, as investors adjusted hedges and portfolio allocations across currencies and regions.
Market confidence and policy uncertainty
Even without immediate implementation of new measures, the shifting tone in U.S.-Europe relations raised concerns about the stability of economic policy assumptions used in pricing risk assets.
Key market moves at a glance
| Asset/Market | Direction | Main driver highlighted by reports |
|---|---|---|
| S&P 500 | Down, 2026 gains erased | Trade and geopolitical tensions |
| Nasdaq-linked futures | Down | Broad risk-off shift |
| European equities (STOXX 600) | Down sharply | Tariff threat impact on exporters |
| U.S. dollar | Weaker | “Sell America” rotation |
| Gold | Higher | Safe-haven demand |
| Swiss franc | Stronger | Risk-off flows |
| U.S. 10-year Treasury yield | Higher | Repricing of rates/fiscal expectations |
FAQ
What does it mean when the S&P 500 “wipes out” year-to-date gains?
It means the index fell below its level at the start of the year, turning its 2026 performance from positive to negative.
Why did a U.S.-Europe dispute affect U.S. stocks?
U.S. and European economies are closely connected through trade and multinational corporate earnings. Tariff threats can raise uncertainty about costs, demand, and revenue exposure.
Why did gold rise during the selloff?
Gold often benefits when investors reduce risk exposure in equities and seek assets perceived as defensive during periods of geopolitical or policy uncertainty.
What happened in Europe’s stock market during the session?
European shares declined, with Reuters reporting the STOXX 600 posted its biggest daily drop in about two months, pressured by tariff-related concerns.
Final Verdict
The S&P 500’s drop erased its 2026 gains as escalating U.S.-Europe tensions tied to Greenland and tariff threats drove a broad pullback in global risk assets. The session was marked by falling U.S. and European equities, a weaker dollar, higher demand for safe havens such as gold and the Swiss franc, and added bond-market volatility influenced by moves in U.S. yields and Japanese debt markets.
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