US stock futures declined on Tuesday, indicating a difficult start to trading following President Trump's escalation of trade tensions with Europe concerning Greenland. This move has reignited fears of tariffs just as corporate earnings reports are becoming more frequent.
Futures for the Dow Jones Industrial Average dropped 1.3%, suggesting an opening loss exceeding 600 points after markets resumed from the Monday holiday. S&P 500 futures decreased 1.4%, and Nasdaq 100 futures fell 1.7%, continuing a negative trend from the previous week for Wall Street.
Markets are reacting to a weekend threat from Trump that the United States will impose broad tariffs on imports from eight NATO countries unless they support a "complete and total purchase of Greenland." The European Union has discussed retaliatory tariffs worth up to $108 billion in response. The EU could also use an "anti-coercion instrument" that might trigger sales of US assets, with potential losses estimated around $8 trillion.
In a Truth Social post on Saturday, Trump stated that US tariffs against the EU would start at 10% on February 1 and increase to 25% by June 1. European officials promptly denounced the threat as "unacceptable." Trump is scheduled to speak at the World Economic Forum in Davos, Switzerland, on Wednesday.
Amid these developments, the benchmark 10-year Treasury yield climbed to just under 4.3% as the US experienced a global bond downturn. This decline was influenced by a sharp sell-off in Japanese bonds, where yields reached record levels due to concerns about tax cuts promised by Japan's prime minister during an election campaign.
The Supreme Court could decide this week on the constitutionality of Trump's use of the International Emergency Economic Powers Act to implement tariffs. Treasury Secretary Scott Bessent said Sunday he considers it "very unlikely" the court would overturn what he described as the president's key economic policy.
Investors are preparing for a heavy schedule of earnings reports, including results from Netflix, Intel, and Johnson & Johnson. Corporate forecasts will be closely monitored, especially as analysts project the S&P 500 to achieve earnings growth of about 12% to 15% this year, with potential for similar declines if "Sell America" sentiment persists.