By Panos Mourdoukoutas
U.S. equities finished the week modestly lower, with large-cap stocks accounting for most of the declines amid rising market volatility.
Trading turned into a tug of war between bulls and bears, driven by conflicting geopolitical headlines out of Europe and Japan, a strong gross domestic product (GDP) report, and a couple of lackluster corporate earnings updates.
For the week, the Dow Jones Industrial Average fell by 0.7 percent to 49,098, after setting another record high on Jan. 22. The S&P 500 slipped by 0.42 percent to 6,915, slightly below its midweek high. The tech-heavy Nasdaq Composite edged down 0.12 percent, while the Russell 2000 snapped a multi-week winning streak, closing lower by 0.2 percent.
Volatility fluctuated sharply throughout the week. The Chicago Board Options Exchange Volatility Index surged above 20 on Jan. 20, dropped below 15 on Jan. 21, and finished the week at 15.74, roughly unchanged from the prior week’s close.
Stocks opened sharply lower across the board on Jan. 20 as renewed tensions between the United States and Europe over Greenland revived concerns about a potential escalation in tariff disputes.
“Tariff fears are back in focus and are now intertwined in geopolitical matters, and not just economic ones. While this adds a new wrinkle to the tariff issue, we believe cooler heads will prevail and that these tariff threats are being used as a negotiating tactic for control of Greenland,” Paul Stanley, chief investment officer at New Hampshire-based Granite Bay Wealth Management, told The Epoch Times.
Selling pressure intensified as global bond yields jumped following an overnight sell-off in Japanese government bonds, sparked by reports of another large fiscal stimulus package. The move pushed yields in the heavily indebted economy to record levels.
Japanese government bond yields have remained unusually low for decades as the country struggled with deflation, giving rise to the so-called yen carry trade, in which investors borrowed yen to invest in higher-yielding assets abroad, including U.S. debt and equities.
In recent months, that trade has come under pressure as inflation returned to Japan and yields on yen-denominated debt began to rise, reducing global liquidity and pushing yields higher elsewhere.
The yield on the U.S. 10-year Treasury note climbed about 7 basis points to 4.29 percent for the day, the highest level since August, draining liquidity from equities and triggering broad-based selling.
Losses were led by the Nasdaq, which fell by 2.39 percent, followed by the S&P 500, down by 2.06 percent, and the Dow, which slid by 1.76 percent. The small-cap Russell 2000 outperformed slightly but still declined by 1.21 percent.
Easing Tensions
Markets rebounded strongly on Jan. 21 as tensions between the United States and Europe over Greenland eased and Japanese bond yields stabilized.
All major averages finished higher, led by small caps. The Russell 2000 gained by 2 percent, while the Dow, S&P 500, and Nasdaq each rose by about 1.2 percent.
The recovery extended into the morning of Jan. 22, as U.S. Treasury yields dipped alongside steadier overseas bond markets, improving investor appetite for risk assets.
Adding to the positive tone was revised data showing the U.S. economy expanded at an annualized rate of 4.4 percent in the third quarter of 2025, slightly above the initial estimate of 4.3 percent.
The updated figure marked the strongest pace of growth since the third quarter of 2023, supported by solid consumer spending, stronger exports, and increased government outlays.
By the close of trading on the day, gains were widespread. The Dow Jones advanced by 0.63 percent, the S&P 500 rose by 0.55 percent, the Nasdaq added 0.91 percent, and the Russell 2000 climbed by 0.76 percent.
Jan. 23 trading opened on a weaker note following disappointing earnings-related news from two key sectors released late the previous day.
In the semiconductor space, Intel, which had rallied in recent weeks on expectations of a turnaround, issued a downbeat outlook, citing supply chain challenges. In the financial sector, Capital One Financial Corp. reported higher provisions for credit losses amid mounting margin pressures.
Intel shares fell by about 17 percent at the close, while Capital One declined by 7.56 percent.
Despite Intel’s sharp drop, losses in the stock markets were offset by gains in Microsoft and Nvidia, allowing the Nasdaq and S&P 500 to finish the day higher. Weakness in Capital One, however, weighed on the broader financial sector and pulled the Dow lower.
Useful Lessons
Alexander Guiliano, chief investment officer at New Jersey-based Resonate Wealth Partners, said the week’s back-and-forth trading offered a useful reminder for investors.
“This week’s market action is an important reminder for investors not to allow political headlines out of Washington to affect their portfolio and to be opportunistic when stocks succumb to headline risk,” Guiliano told the Epoch Times.
“Tuesday’s dip ended up being a nice buying opportunity, especially for those who have missed much of the rally over the past several months.”
He expects markets to remain sensitive to headlines amid heavy news flow from Washington alongside ongoing earnings reports and economic data releases, noting that such volatility can create opportunities.
Guiliano is also closely watching upcoming technology earnings.
“Many of the Magnificent 7 names have actually underperformed the S&P 500 over the past 12 months, so these next few earnings reports can be an important catalyst to unlock some additional stock price growth in some of the Magnificent 7 names,” he said.
Bret Kenwell, U.S. investment analyst at eToro, is focusing on Meta Platforms, which he believes has become the least expensive of the Magnificent 7 stocks.
“A year ago, that honor belonged to Alphabet, which is now up more than 70 percent over the past 12 months. That’s not to say Meta will have a similar reaction, but it should serve as a reminder that while markets undergo sector rotation, there is oftentimes rotation within the Magnificent 7 as well,” he said.
