S&P500: Stock Market Forecast Uncertain as Trump Greenland Tensions Drive Volatility

• Major indexes rebounded midday with the Dow up 0.60%, S&P 500 up 0.44%, and Nasdaq up 0.19% after Trump's Davos remarks eased immediate military concerns
• The selloff combined traditional uncertainty liquidation with a 'sell America' protest trade by Europeans dumping U.S. stocks, Treasuries, and the dollar in opposition to Trump's Greenland pursuit
• Technical indicators show vulnerability with the S&P 500 straddling its 50-day moving average at 6,831.89, while analysts warn of potential escalation similar to April 2025's Liberation Day tariff announcement that caused 9-11% losses in two days

Market Summary: S&P 500 Volatility Driven by Greenland Tensions

Key Market Performance

U.S. markets recovered at mid-session Wednesday, January 21, 2026, following a two-day selloff. At 18:42 GMT, the Dow Jones traded at 48,778.61 (+0.60%), the S&P 500 at 6,826.70 (+0.44%), and the Nasdaq Composite at 22,997.071 (+0.19%). Tuesday's session marked the worst performance since October.

Catalyst for Recovery

Markets rebounded after President Trump, speaking at Davos, ruled out military action regarding Greenland while maintaining pressure for diplomatic negotiations. Trump threatened an additional 25% tariff on European countries opposing his plan, while EU members prepared retaliatory measures.

Market Dynamics

The selloff was driven by two factors: uncertainty-related liquidation and the "Sell America" trade—a European protest involving selling U.S. stocks, Treasuries, and the dollar. This combination produced Monday and Tuesday's exaggerated decline.

Analysts forecast a rangebound market as the best-case scenario, with investors selling rallies. The worst-case mirrors April 2025's "Liberation Day" tariff announcement, which triggered the largest two-day loss in history: S&P 500 down 10%, Dow 9%, and Nasdaq 11%.

Technical Levels

The Nasdaq tested support at its long-term 50% level (22,959.14) while trading below its 50-day moving average (22,256.59). The S&P 500 straddled its 50-day moving average (6,831.89), with potential downside to 6,754.13 if support fails.

Corporate Earnings

Of 33 S&P 500 companies reporting through last Friday, 84.8% beat profit estimates versus the long-term average of 67.3%.

Additional focus remained on Davos remarks, the Supreme Court case regarding Fed Governor Lisa Cook, and ongoing earnings season.