Weakness Persists as Trump Speaks, Cook Case Looms

Published as of: January 21, 2026, 9:15 a.m. ET

(Wednesday market open) U.S. markets started losing their grip on overnight gains early Wednesday after the worst sell-off since October 10 as geopolitical concerns still simmer. On one side of the Atlantic, President Trump addresses the World Economic Forum in Davos this morning following his threats of new tariffs over Greenland, while on the other, the Supreme Court hears arguments over Trump's attempt to fire Federal Reserve Governor Lisa Cook over alleged but unproven financial improprieties. It could be another volatile day and investors should consider treading carefully until things stabilize.

On Tuesday, investors were in a risk-off, "sell America" mood, driving U.S. stocks, Treasury bonds, and the dollar sharply lower over Trump's Greenland push and rising Japanese bond yields. The Magnificent Seven mega-cap tech stocks took a hit, with each closing at least 1% lower, as the Nasdaq lost 2.4% and the S&P 500 shed 2.1% for its worst day in three months. Nvidia (NVDA) lost more than 4% and Broadcom (AVGO) more than 5%. Gold and silver hit new record highs. Gold jumped another 2% early today, though Treasury yields slipped from yesterday's five-month peak. In his speech today, which was still taking place as of publication, Trump boasted about the U.S. economy and said Europe is on the wrong track, the BBC reported.

On the earnings front, Netflix (NFLX) sank early after the streaming firm's guidance disappointed. This morning featured Johnson & Johnson (JNJ) and Halliburton (HAL), while reporting accelerates tomorrow with earnings from Intel (INTC). Tomorrow also features gross domestic product (GDP) and Personal Consumption Expenditures (PCE) prices data. Analysts expect the government's final estimate for third quarter GDP to remain 4.3% on a seasonally adjusted annual basis, while October PCE prices are expected to rise a modest 0.2%. Personal income and spending will also be out early tomorrow, giving insight into consumer trends.

1. Yen carry trade rears its head again: Is a further unwinding of the yen "carry trade" about to reset U.S. tech stocks again? It looks possible. A chaotic selloff in Japanese bonds Tuesday spilled over into U.S. bond and equities markets (which were also hit by Trump's Greenland threats), helping push the yield on the 10-year Treasury well above its recent range. At one point, the 10-year yield touched 4.3%, the highest level since August. If these moves continue, higher yields could cause investors to reprice tech stocks and other higher-beta assets. The same thing happened in the summer of 2024, after the Bank of Japan (BOJ) shifted to a rate-hike cycle, a huge change after years of negative rates. As a result, the carry trade—when traders borrow in a low-rate market to invest in a market with higher returns—began to unwind. Now, Japanese policy rates and yields are at the highest level in decades and U.S. risk assets are feeling the effects. The question is, for how long.
    
2. Tariff threats need to be taken in context: While investors were rattled Tuesday by Trump's escalation of efforts to take control of Greenland, the longer-term impact of his tariff threats against EU countries is still up in the air. Trump threatens 10% tariffs starting February 10 on eight NATO members, rising to 25% on June 1. Trump is well-known for making aggressive demands as an opening in negotiations and then scaling them back, something we saw repeatedly with tariffs over the past nine months. "We need more details. We have seen many tariff threats recently, with not all of them being carried out," said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, or SCFR. Still, if carried out, the tariff increases on Europe would amount to a serious escalation, perhaps giving longevity to the "sell America" trade—in which investors dump U.S. assets, including stocks, Treasuries, and the dollar—over volatility in trade policy and foreign relations as well as concerns about the independence of the Federal Reserve—which shift into focus today as the administration argues to the Supreme Court that Trump has the right to fire Fed governors.
    
3. Volatility could continue climbing: The Cboe Volatility Index (VIX)—which reached nearly two-month highs yesterday above 20—continued trading near that level this morning, up another 2.4%. Anything above 20 indicates concerns about sharper moves in stocks over the coming weeks, but it's still about average historically. Without a resolution of the geopolitical rumbles in the next few week or so, VIX could climb into the 25 to 27 range, testing the October and November highs. The SPX 30-day put/call skew is in the 75th percentile, meaning institutions have bought downside protection against perceived volatility ahead.

• Netflix cratered 7.5% early despite narrowly beating earnings expectations. It cited increased subscribers, pricing, and ad revenue. But investors punished shares for slowing subscriber growth and soft guidance. The company said it topped 325 million subscribers in 2025. It also said it would pause share buybacks to help finance its targeted acquisition of Warner Bros. Discovery (WBD).
   
• United Airlines (UAL) climbed 3.5% in early trading, still being lifted by yesterday's better-than-expected fourth quarter earning and strong guidance.
   
• Kraft-Heinz (KHC) dropped nearly 6% before the open after the company said that Berkshire Hathaway (BRK.A) could sell nearly its entire ownership stake in the firm, about 27% of the company.
   
• Johnson & Johnson retreated 2.6% ahead of the open despite posting better-than-expected quarterly results and topping analysts' sales and profit estimates with its guidance. The good news may have been priced in with shares up more than 30% over the last six months.
   
• The tech sector showed a bit of life this morning after yesterday's flop, possibly indicating nibbles at the lows. Nvidia, Intel, Western Digital (WDC), Micron (MU), Taiwan Semiconductor Manufacturing (TSM), and Advanced Micro Devices (AMD) all advanced 1% or more in the early going. The early strength might reflect a 4% jump in shares of Arm Holdings (ARM) after Susquehanna upgraded its view on shares to positive from neutral.
   
• Mining stocks rose early Wednesday following the rallies in gold and silver. Shares of Freeport-McMoRan (FCX) and Newmont (NEM) were each up 2% or more. Freeport reports tomorrow morning.
   
• Small cap stocks continue to outperform their larger brethren. The Russell 2000^® (RUT) Index fell yesterday but less than the S&P 500 index, marking 12 straight sessions in which it outpaced the SPX. Getting to 13 would match a streak last recorded in June 2008. The shift toward small-caps so far this year could reflect rotation after three-straight years of double-digit SPX gains.
   
• The benchmark 10-year Treasury note yield slipped about one basis point early Wednesday to below 4.3% but remains elevated from its long-term range of between 4% and 4.2% amid worries that European countries might sell their U.S. Treasury holdings. A Danish pension fund said yesterday it's closing its position of around $100 million in U.S. Treasuries, CNBC reported. Markets may get unnerved, sending yields higher, if news like this continues.
   
• Bitcoin (/BTC), which dived yesterday amid risk-off trading, slipped a bit more early Wednesday and remained below $90,000. Before the latest geopolitical skirmish, it had been near two-month highs.

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The S&P 500 (SPX—candlesticks) gapped down and sliced through its 50-day moving average (red line) on Tuesday. The index has bounced off its 50-day multiple times during its rally from the lows of April 2025. It remains well above its 200-day moving average, commonly considered the threshold between bull and bear markets.

Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week.

January 22: Q3 GDP final estimate and expected earnings from GE Aerospace (GE), Procter & Gamble (PG), Abbott Laboratories (ABT), Freeport-McMoRan (FCX), Intel (INTC), Intuitive Surgical (ISRG), Capital One Financial (COF), and CSX (CSX).

January 23: Expected earnings from Booz Allen Hamilton (BAH) and Ericsson (ERIC). University of Michigan consumer sentiment survey final results for January.

January 26: Expected earnings from Baker Hughes (BKR), Steel Dynamics (STLD), and WR Berkley (WRB)

January 27: Consumer confidence, new home sales and expected earnings UnitedHealth Group (UNH), Boeing (BA), American Airlines (AAL), General Motors (GM), United Parcel Service (UPS), Northruop Grumman (NOC), Kimberly-Clark (KMB), HCA Healthcare (HCA), and RTX Corp (RTX), Seagate Technology (STX), and Texas Instruments (TXN).

January 28: Federal Reserve policy decision, and expected earnings from Microsoft (MSFT), Meta (META), Tesla (TSLA), IBM (IBM), Lam Research (LRCX), ASML Holding (ASML), AT&T (T), Amphenol (APH), Corning (GLW), GE Vernova (GEV), General Dynamics (GD), Raymond James (RJF), Starbucks (SBUX), Danaher (DHR), Progressive (PGR), Lennox (LII), Teva Pharmaceuticals (TEVA), Textron (TXT), and United Microelectronics (UMC).