• US stocks rebounded after Trump ruled out military action on Greenland
• Gains faded as tariff risks and EU-US trade tensions remained in focus
• Yields fell and banks rose, but policy uncertainty kept investors cautious

US equities rebounded on Wednesday after President Trump ruled out using military force to acquire Greenland, easing a key source of market anxiety. In comments delivered at the World Economic Forum in Davos, Trump said he would not use excessive force, calming fears that had driven a sharp sell-off in the prior session. Stocks moved higher alongside falling Treasury yields, while the dollar stabilized after earlier weakness.

The Dow Jones Industrial Average rose about 160 points, or 0.33 percent, while the S&P 500 gained 0.25 percent and the Nasdaq Composite advanced just 0.1 percent. Gains were more pronounced earlier in the session, but stocks faded from their highs as investors weighed ongoing tariff risks between the US and Europe. Despite ruling out military action, Trump reiterated that he is seeking immediate negotiations over Greenland, keeping geopolitical uncertainty in focus.

Sector performance reflected selective relief rather than broad risk-on positioning. Bank stocks outperformed after Trump said he would ask Congress to pursue a 10 percent credit card interest rate cap, with shares of major lenders posting modest gains. Bond prices rose and yields fell following Trump’s remarks, reversing part of Tuesday’s sharp move higher. The prior session’s sell-off had marked the worst day for US equities since October and briefly pushed the S&P 500 and Nasdaq into negative territory for 2026.

Policy and Trade Risks Remain in Focus

Despite Wednesday’s rebound, investor caution remained elevated. European lawmakers suspended approval of the EU-US trade deal agreed in July, citing Trump’s proposed tariffs of 10 to 25 percent on European goods tied to Greenland negotiations. European leaders warned that escalating tariffs could trigger retaliatory measures, including restrictions on US companies’ access to the single market.

Adding to the policy backdrop, Supreme Court justices expressed skepticism over whether President Trump has the authority to dismiss Federal Reserve Governor Lisa Cook. Comments from the bench highlighted concerns about preserving Fed independence, a factor closely watched by markets amid elevated political uncertainty. While the immediate tail risk around Greenland eased, investors remain focused on how trade policy, institutional independence, and geopolitical negotiations may shape market volatility in the days ahead.

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