Global stock markets declined for a fourth consecutive session on Wednesday, while U.S. index futures attempted a tentative rebound as traders awaited a speech from U.S. President Donald Trump at Davos, seeking clues on whether he would de-escalate tensions with Europe over Greenland that have intensified in recent days.
As of the time of writing, Dow Jones futures were down 0.27%, S&P 500 futures fell 0.20%, and Nasdaq futures dropped 0.39%.
The MSCI World Index declined 0.12%, marking its fourth straight day of losses; the Europe STOXX 600 index also fell. This index, with its heavy weighting in export-oriented sectors including defense, pharmaceuticals, and technology, came under pressure as risks of additional U.S. tariffs increased.
Asian equities also followed the late-session U.S. decline lower. Concerns about foreign capital selling U.S. assets—the so-called "Sell America" trade—resurfaced. This trade had previously emerged following the "Liberation Day" tariff announcement last April. Wall Street's overnight plunge of over 2%, coupled with the U.S. dollar posting its largest single-day drop in over a month, further fueled these sentiments.
However, futures tracking the benchmark U.S. indices rose by 0.2%. This followed the benchmark index recording its largest single-day drop in three months. Selling pressure eased somewhat as Trump adopted more conciliatory language before departing for the World Economic Forum, although he maintained the U.S. should control the autonomous territory.
"The key question is whether dip-buyers will step in to support early weakness, or whether traders will view developments as sufficient to warrant further de-risking," said Chris Weston, Head of Research at Pepperstone.
Bond Markets Finally Stabilize Providing further support to market sentiment, a strong rebound in Japanese long-term government bonds helped global debt markets stabilize. The yield on the U.S. 30-year Treasury note fell 1 basis point to 4.91%, with the entire yield curve shifting lower.
On Tuesday, Japanese long-term bonds suffered their fiercest selloff in nearly 25 years due to market worries that Japanese Prime Minister Sanae Takaichi might push for expanded fiscal spending. Concurrently, the U.S. 30-year yield approached the 5% threshold for the first time since last September, and German bond yields also rose sharply.
By Wednesday, Japanese government bond prices rebounded, with returning buyers nearly erasing the previous day's yield gains. A similar recovery was seen in U.S. Treasuries: the 30-year yield decreased by 2.5 basis points to 4.896%.
The VIX index, which measures hedging demand for S&P 500 volatility, retreated slightly to 19.19, yet remained near the two-month high touched on Tuesday, indicating investor nervousness had not significantly abated.
Safe-haven sentiment was still most evident in precious metals: gold approached $4,900 per ounce; silver also hit a fresh record high. The U.S. dollar stabilized after three consecutive days of declines.
"Despite a lot of geopolitical noise, the current equity market move looks more like a pure technical correction than a broad risk-off phase. Certainly, more conciliatory comments from Trump would improve sentiment, but in my view, a strong rebound is difficult to trigger unless the yield curve moves significantly lower," said Roberto Scholtes, Chief Strategist at Singular Bank.
Trump's Appearance Delayed Trump was originally scheduled to speak in Davos at 2:30 PM local time, but his appearance was delayed due to a technical issue with his aircraft. U.S. Treasury Secretary Scott Bessent stated Trump might arrive approximately three hours late, though the final schedule was not yet confirmed.
The aircraft carrying Trump initially departed from Joint Base Andrews around 9:45 PM Washington time. White House Press Secretary Caroline Leavitt told reporters that shortly after takeoff, the crew identified a "minor electrical circuit fault" and, as a precaution, "Air Force One" returned to base. The plane landed safely back at Andrews Air Force Base just after 11:00 PM Washington time, after a flight of about 1 hour and 20 minutes. Subsequently, Trump and his staff boarded a new aircraft, which departed for Switzerland a few minutes after midnight.
Meanwhile, on Wednesday (January 21st), European Commission President Ursula von der Leyen, speaking to the European Parliament in Strasbourg, France, hardened her rhetoric towards Trump. "We are at a crossroads," said von der Leyen, head of the EU's top executive body, "Europe prefers dialogue and solutions—but if necessary, we are fully prepared to act with unity, urgency, and determination."
Trump's tariff threats aimed at securing Greenland, coupled with his refusal to rule out military options, are subjecting this bull market to its most severe stress test since the trade turmoil of last April. This event is occurring while market optimism is at multi-year highs and the rally has shown broader participation.
"The 'Sell America' trade was the core driver of the main market moves overnight, with investors trying to reduce exposure to the U.S. as, in many people's eyes, it has become an unreliable partner pursuing self-defeating policies," said Mantas Vanagas, Senior Economist at Westpac.
Analysts noted that even if a more restrained stance from Trump alleviates anxiety, a sustained recovery would still depend on robust earnings expectations and signs that capital expenditure from large tech companies is beginning to translate into actual returns.
"We have stretched many assets into overbought territory over the past two weeks, so a relatively healthy correction is needed," said Georges Debbas, Head of European Equity & Derivative Strategy at BNP Paribas.
He stated that further upside from current levels requires European fiscal spending to translate into earnings upgrades; in the U.S., companies need to alleviate investor concerns about the commercialization (monetization capability) of big tech spending.
"Without these two elements, it's hard to see either European or U.S. equities sustaining very strong gains," Debbas said.
Bessent: Not Worried About U.S. Bond Selloff, Japanese Counterparts Will Act. U.S. Treasury Secretary Scott Bessent stated on Wednesday that he is not concerned about the selloff in U.S. Treasuries, linking the selling pressure to volatility in Japanese Government Bonds (JGBs). He mentioned being in contact with Japanese counterparts, who assured him they would take measures to stabilize the market.
Denmark's stance within U.S. Treasuries is as insignificant as the country itself. He called on European allies to understand that Greenland needs to become part of the United States and suggested they wait for President Trump's speech.
In an Era of High U.S. Stock Valuations, No Strong Earnings Guidance = Sell the News. Since the mid-January onset of the latest U.S. earnings season, reported results from S&P 500 component companies show aggregate actual profits significantly exceeding consensus earnings expectations. Yet, unmoved investors have delivered the worst post-earnings-beat stock price reaction on record.
In analysts' view, the primary logic behind this lies in global investors' growing uncertainty at the start of the year regarding the prospects for 2026 geopolitics, macroeconomics, monetary policy, and fiat wealth storage. Additionally, the failure of some companies to raise their 2026 earnings guidance during reports has led investors to sell on strength, making "buy the rumor, sell the news" seem like the default action.
Approximately 81% of S&P 500 component companies have reported actual Q4 profits that beat consensus estimates.
Wall Street Cries: Political Turmoil is Just Noise, Earnings Growth is the Buying Opportunity. The U.S. is threatening to wage at least an economic war to seize control of Greenland; political uncertainty in Japan has disrupted global bond markets; furthermore, the Federal Reserve's independence remains under threat from the Trump administration.
On Tuesday, stocks recorded their largest single-day drop since October, but Wall Street strategists argue the foundation for further gains remains solid. Their logic often hinges on the view that risk assets have historically looked through geopolitical turmoil, unless such chaos triggers a spike in oil prices.
Although crude prices climbed on Tuesday, both Brent and West Texas Intermediate (WTI) traded well below long-term average levels. Other bullish arguments stem from corporate earnings, with Q4 profit growth estimated at around 9%.
Focus Stocks Storage concept stocks continued their premarket strength, with SanDisk up over 3%, and Western Digital and Micron Technology rising over 2%.
Netflix fell nearly 6% premarket, due to Q1 earnings guidance missing expectations and a pause in its share buyback program.
Kraft Heinz dropped 3.9% premarket, as Berkshire Hathaway may sell its 27.5% stake.
Johnson & Johnson declined nearly 3% premarket after reporting its Q4 earnings.
Rio Tinto rose over 4% premarket, driven by strong growth in Q4 iron ore and copper production.
United Airlines climbed over 4% premarket after the company issued optimistic Q1 and full-year outlooks.
CORVUS Pharmaceuticals fell over 10% premarket after the company launched a public offering of 150 million shares.
Pinduoduo surged over 7% premarket, as tax authorities imposed a fine of 100,000 yuan on "Pinduoduo" in accordance with laws and regulations.
Baidu rose over 4% premarket, with several major brokerages optimistic about its Q4 performance.
iQiyi gained over 3% premarket, as its revenue-sharing dramas "Old Uncle" and "Mirage" performed well.
Kingsoft Cloud Holdings increased over 3% premarket after completing a strategic upgrade of its Xingliu Platform.
MINISO Group rose 2.2% premarket, benefiting from continued share buybacks and being named J.P. Morgan's top pick for domestic demand stocks in the Year of the Horse.
Pony.ai advanced 2.3% premarket; as a leader in Robotaxi technology, brokerages suggest it stands to benefit significantly from gradually opening regulations.
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