Markets digest latest headlines
- Stocks—and Treasuries—fell Tuesday
- Precious metals hit new record highs
- Moves in some key areas reversed by end of day
Traders and investors may be getting used to starting the week with some overhang from the weekend’s news.
That doesn’t make the unexpected any less of a surprise, though. On Tuesday, US stocks opened sharply lower as escalating rhetoric over Greenland raised the prospect of a US-EU tariff showdown and highlighted political tensions among traditional allies.
Market responses were mostly predictable—the stock market fell, while precious metals hit new highs:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Crude oil and (especially) natural gas prices also rallied, which helped make energy the second “strongest” S&P 500 sector, although it posted a small loss. The traditionally defensive consumer staples sector was the only one to end the day with a gain.
Other moves appeared to be out of sync with events. Longer-term Treasury prices—which often rise on “safe-haven” buying when stocks sell off—also declined on Tuesday, highlighting the shift away from US assets that accompanied this episode (also reflected in a falling US dollar).
There were also some counterintuitive developments below the stock market’s surface, especially as the day wore on. For example, aerospace and defense—which has one of the stronger year-to-date gains among S&P 500 industry groups—initially rallied Tuesday morning. However, even though Northrop Grumman (NOC) and Lockheed Martin (LMT) both hit all-time intraday highs in early trading, by mid-morning they were in negative territory for the day:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Both stocks have surged this month against what Morgan Stanley & Co. analysts have described as a favorable backdrop for defense this year.1 Also, both have previously rallied on heightened geopolitical uncertainty (e.g., Venezuela at the beginning of the year). While Tuesday’s declines may have simply been normal pauses in potentially overextended short-term rallies, they could also suggest that markets were rethinking their initial reactions to the events of the day—or at least the magnitude of those reactions—and acknowldeging the potential for compromise and de-escalation.
A final note on tariffs: Morgan Stanley & Co. strategists think President Trump's recently announced 10% (additional) tariffs on certain European countries would have a “fairly contained direct cost impact” on major US stock indexes. However, they also note the bigger risk is whether the the EU takes stronger countermeasures (specifically, implementing its "anti-coercion" tool and focusing on services, in addition to goods), which would “pose more of a potential headwind to US mega caps.”2 Tech was the weakest S&P 500 sector on Tuesday.
Market Mover Update: Small- and mid-cap stocks didn’t escape Tuesday’s sell-off, but they still fared better than the broad market. The Russell 2000 (RUT) small-cap index and the S&P 400 (MID) mid-cap index both closed down less than 1.5%, while the S&P 500 (SPX) fell more than 2%.
Today’s numbers include (all times ET): mortgage applications (7 a.m.), Housing Starts and Building Permits (8:30 a.m.), Construction Spending (10 a.m.), Pending Home Sales Index (10 a.m.).
Today’s earnings include: American Airlines (AAL), Freeport McMoRan (FCX), Halliburton (HAL), Johnson & Johnson (JNJ), Travelers (TRV).
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1 MorganStanley.com. A Bullish 2026 Outlook; Ratings Re-Stack. 12/16/25.
2 MorganStanley.com. Weekly Warm-up: Key Debates & Earnings Season Chartbook. 1/20/26.