Tumble Tuesday. All three major indexes closed in the red on Tuesday as President Donald Trump’s latest efforts to secure Greenland spurred a bout of the “Sell America” trade.

Over the weekend, Trump said he would impose a 10% tariff on eight European countries—Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland—to pressure them to allow the U.S. to buy Greenland. The duties would increase to 25% if a deal wasn’t reached by June 1, Trump added. The president later threatened to impose 200% tariffs on French wine and Champagne.

Last year, investors were eventually willing to overlook tariff uncertainty. Today’s selloff, however, suggests that markets remain susceptible to geopolitical volatility.

The Dow Jones Industrial Average closed down 871 points, or 1.8%, while the S&P 500 was off 2.1%. The Nasdaq Composite fell 2.4% and turned negative for the year, down 1.2%.

“U.S. tariff threats tied to Greenland introduced a new and destabilizing form of geopolitical risk,” wrote Michael Gayed, author of the Lead-Lag Report. “Safe-haven flows suggest investors are reassessing risk after a prolonged period of complacency.”

The stock selloff makes sense if investors are adopting a risk-off approach. But there’s more afoot. If investors were simply moving to safer assets, bond prices would have increased. Instead, they also fell on Tuesday, sending yields to their highest value since August (bond prices and yields move in opposite directions).

The bond market’s losses point to a broader “Sell America” trade, notes my colleague Karishma Vanjani, with investors worried that trade tensions could escalate further. “Using trade policy to force a sovereign land purchase undermines the stability of the Western alliance and makes U.S. assets look a whole lot more risky,” she wrote.

To be sure, the Greenland “kerfuffle” (as U.S. Commerce Secretary Howard Lutnick called it at Davos today) wasn’t the only thing weighing on bond prices. Weak demand from a Japanese bond auction was also spilling over to U.S. Treasuries.

And there’s a chance that the market’s pullback on Tuesday also turns out to be a kerfuffle rather than a sign of a prolonged downturn.

“Our conviction remains that political headlines are very unlikely to change the positive fundamental trends already in place,” wrote Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute. “We believe the global economy is set to grow faster in 2026, especially in the U.S.”

The Hot Stock: Sandisk +9.6%
The Biggest Loser: NetApp -9.4%

Best Sector: Consumer Staples +0.1%
Worst Sector: Information Technology -2.9%

The Supreme Court will hear oral arguments tomorrow in Trump v. Cook, a high-stakes case centered on the president’s attempt to fire Federal Reserve Gov. Lisa Cook. The ruling could redefine the limits of executive power over the central bank’s independence.

The administration alleges that Cook engaged in mortgage fraud, misstating certain details on mortgage documents before she joined the Fed. Cook has disputed those claims.

Fed governors can only be removed from the board “for cause.” The administration says mortgage fraud meets the standard, but lower courts have ruled against the government and blocked the firing. Tomorrow, administration officials will petition the court to allow the firing to proceed, opening up a space on the Board of Governors for a new appointee.

“The Supreme Court doesn’t need to resolve those factual disputes to decide the case,” writes my colleague Nicole Goodkind. “What it will decide is whether allegations alone are enough to justify removing a Fed governor, or whether presidents must clear a higher bar before taking that step.”

The ruling will have broad repercussions beyond Cook’s tenure, Nicole adds. If the justices rule in the administration’s favor, it could increase the chance that Fed Chair Jerome Powell could be removed, as well. The Justice Department is currently investigating Powell over disclosures related to renovations at the Fed’s headquarters. No charges have been filed and Powell has denied any wrongdoing, but analysts say a ruling against Cook may put pressure on Powell.

The ruling will also be an important test of presidential authority over the central bank and could alter the boundaries of the central bank’s independence from a sitting president.

“We have been arguing that the Cook case is more important for the policy trajectory than the identity of the next Fed chair. We think that’s even more true now,” Aditya Bhave, an economist at Bank of America, wrote in a recent note.

We’ll be covering the arguments live tomorrow. In the meantime, read Nicole’s preview here.

Charles Schwab, Citizens Financial Group, Halliburton, Johnson & Johnson, Kinder Morgan, Prologis, TE Connectivity, Teledyne Technologies, Travelers, and Truist Financial report quarterly results tomorrow.

The National Association of Realtors releases its Pending Home Sales Index for December. The index jumped 3.3% month over month in November, which was the strongest month for sales since February 2023, once accounting for seasonal factors, according to NAR chief economist Lawrence Yun.

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