Market Recap - Wednesday, January 21, 2026
Markets Bounce Back as Trump Steps Back on Tariffs
Stocks rebounded sharply today, recovering much of Tuesday’s decline after a surprise move from former President Trump helped ease global trade tensions. The S&P 500 rose 1.16%, Dow added 1.21%, Nasdaq gained 1.18%, and the Russell 2000 surged 2.00% as small caps led the way. The equal-weighted S&P also outperformed the regular index, signaling strong breadth across the market.
Trump’s announcement of a “framework” for a potential deal involving Greenland and the Arctic region — and more importantly, his decision to suspend the threatened February 1st tariffs on the EU — boosted investor confidence. That move helped defuse what had become a major geopolitical overhang and gave stocks across sectors a lift. Riskier and more shorted names outperformed, along with sectors like semiconductors, biotech, energy, regional banks, homebuilders, machinery, and chemicals. Tech mostly gained, with Alphabet and Tesla leading the “Magnificent 7,” while Microsoft dipped slightly.
Meanwhile, Treasury yields fell modestly, gold hit a fresh record above $4,800/oz (+1.5%), and crude oil edged up 0.4%. Bitcoin climbed slightly. The dollar ticked higher, and traders saw further signs that the Fed may hold off on aggressive rate cuts — markets are now pricing in fewer than two cuts for the year. Pending home sales for December slumped 9.3% — the biggest drop since the early COVID lockdowns — but construction spending and industrial activity remained firm.
In Washington, the Supreme Court heard arguments in the Trump administration’s attempt to fire Fed Governor Lisa Cook. While several justices expressed skepticism of the administration’s case, a final ruling may not come until later in the year. Markets generally expect the Fed’s independence to be upheld.
On the earnings front, there was plenty of action:
Netflix beat Q4 expectations but drew scrutiny for soft margin guidance and new investments.
Johnson & Johnson delivered strong results but faced pressure from fresh talc litigation headlines.
Halliburton, United Airlines, and Teledyne beat expectations.
Progress Software jumped nearly 11% after topping EPS estimates and issuing upbeat guidance.
Kraft Heinz fell over 5% after Berkshire Hathaway registered its full 27.5% stake for potential sale.
GameStop rose on news of a stock purchase by CEO Ryan Cohen.
Nathan’s Famous soared nearly 9% after agreeing to be acquired by Smithfield Foods.
Here’s Our Take
Markets welcomed Trump’s decision to walk back tariff threats, which had been hanging over stocks for weeks. The move reinforces expectations of a more de-escalatory posture heading into a pivotal election year, and it helped drive strong gains across both large and small caps. The strength in semis, regional banks, and industrials reflects growing optimism that the economy remains resilient — even as rate cut hopes continue to cool.
Still, there’s no shortage of uncertainty. The Supreme Court’s Fed case, geopolitical posturing, and a light economic calendar mean investors will remain focused on earnings season, with Big Tech set to report next week. Meanwhile, today’s drop in pending home sales is a reminder that housing remains a soft spot. We’re watching for signs of earnings fatigue, margin pressure, and shifts in rate expectations — but for now, the market is holding up well.
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