Published on: 2026-01-22
U.S. stocks are higher in the latest session because investors finally got the one thing they wanted most: less trade stress.
On Wednesday, January 21, 2026, President Donald Trump announced that he would not implement proposed tariffs on several European countries after outlining a "framework" related to discussions about Greenland.
That shift was crucial because markets had just been hit by a sharp risk-off move the day before, when tariff threats revived fears of a broader trade war.
When the tariff threat faded, investors did what they usually do in a headline-driven market. They quickly reassessed risk, moved away from defensive stocks, and shifted toward equities, particularly those that typically struggle the most during escalating trade conflicts.
Tariff risk cooled after Trump said the tariff plan was off, tied to a Greenland-related framework.
Relief rally mechanics kicked in, with short covering and systematic buying after a sharp risk-off session.
Volatility dropped, which often supports higher equity prices because hedging costs fall.
Treasury yields have decreased, which has positively impacted valuations, particularly in the growth and technology sectors.
| Index | Close | Daily move |
|---|---|---|
| S&P 500 | 6,875.62 | +78.76 (+1.2%) |
| Dow Jones Industrial Average | 49,077.23 | +588.64 (+1.2%) |
| Nasdaq Composite | 23,224.82 | +270.50 (+1.2%) |
| Russell 2000 | 2,698.17 | +52.81 (+2.0%) |
| VXX ETF | 26.76 | -2.70 (-9.15%) |
By the close, the rebound was broad across major U.S. indexes.
S&P 500: 6,875.62, up 78.76 points (+1.2%)
Dow Jones Industrial Average: 49,077.23, up 588.64 points (+1.2%)
Nasdaq Composite: 23,224.82, up 270.50 points (+1.2%)
Russell 2000: up about 2% (small caps led)
Stocks often rise when yields fall, because future profits are discounted at a lower rate.
For example, the 10-year Treasury yield fell to about 4.25%, reversing much of the prior move higher that had accompanied the tariff shock.
The volatility complex dropped as investors backed away from the worst-case trade scenarios. A large decline in volatility products is typical when a policy shock gets "de-escalated."
The day before the market rebound, investors had to consider the possibility that tariffs impacting Europe could lead to retaliation, supply chain disruptions, and increased inflation.
When Trump backed off his stance, this risk diminished, encouraging investors to reenter the market and increase their exposure to riskier assets.
Today's jump was not only about better news. It was also about positioning.
When markets sell off on a scary headline, many short-term traders hedge fast. They buy volatility protection, they cut exposure, and some funds go net short. If the headline then softens, that positioning can reverse quickly, and the rebound can look bigger than the news itself.
That is also why small caps outperformed. Smaller companies often react more to shifts in risk mood because they can be more sensitive to funding costs and economic confidence.
The rebound was not only about politics.
For example, Halliburton and United Airlines helped support sentiment with results that came in better than expected, while Netflix and Kraft Heinz fell on company-specific concerns.
This mix matters because it shows the rally was broad, yet it still rewarded fundamentals in areas where news improved.
| Channel | What changes when tariffs rise | What changes when tariffs fade |
|---|---|---|
| Corporate margins | Input costs can rise, and margins can compress. | Margin fears ease, and guidance risk can fall. |
| Inflation path | Price pressures can persist, especially in traded goods. | Inflation risk can cool at the margin. |
| Interest rates | Higher inflation risk can keep yields elevated. | Lower inflation risk can help yields stabilise. |
| Growth expectations | Trade friction can slow demand and investment. | Growth expectations can stabilise. |
| Risk premium | Uncertainty can lift volatility and reduce valuations. | Risk appetite can return and lift valuations. |
That last point is the most important for daily market moves. Traders can model a tariff rate, but they struggle to price policy headlines that change day to day.
| Market | Level area | Why it matters today |
|---|---|---|
| S&P 500 | 6,800–6,900 | The index rebounded sharply to 6,875.62, so this zone often becomes the next pivot. |
| Dow | 49,000 | The Dow reclaimed 49,077.23, which is a psychological handle after volatility. |
| Nasdaq | 23,000–23,250 | The Nasdaq closed at 23,224.82, which traders often treat as a near-term range marker. |
| US 10-year yield | ~4.25% | Yields easing helped the rally, so a reversal higher can challenge equities again. |
This section is designed for planning, not prediction.
Bulls typically want: Follow-through buying, plus a calm tape where tariff headlines stay quiet for several days.
Bears typically want: Another policy surprise that pushes price back below the rebound pivot, which can turn a bounce into a lower high.
A tariff threat can fade, but it can also return quickly if negotiations break down or if political messaging changes.
Reporting also shows that European institutions and leaders have signalled resistance to coercive trade tactics, which means the negotiation path may remain bumpy.
Several reports described the "framework" language as vague, with limited concrete information offered to markets.
If investors feel that the same conflict can resurface without warning, volatility can return even if equities remain supported in the near term.
The market can absorb political noise more easily when yields are calm.
If yields start rising again, equities can lose support quickly, because the discount-rate channel can overpower the relief from a single headline.
U.S. stocks rose after President Trump backed off from threatened tariffs against several European countries tied to Greenland-related tensions.
All major US indexes rose about 1.2%, while small caps led, with the Russell 2000 up about 2.0%
Not necessarily. Today's market movement appears to be a relief rally following a decrease in policy risk. Traders will still watch for follow-through, bond market stability, and whether new headlines reverse the tone in the days ahead.
In conclusion, the stock market is up today because the White House dialed back a tariff threat, which removed a significant near-term source of stress for investors. The rebound was confirmed by a significant drop in volatility and stronger bond pricing, both of which often indicate that fear is leaving the market.
However, headlines largely influenced this session. The next move in the market will likely depend on whether trade policy remains stable and whether upcoming corporate guidance indicates that costs and demand remain steady.
For traders, the goal is not to predict every headline; instead, it is to manage risk around key levels and maintain discipline, especially when the news cycle intensifies.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
