U.S. Stocks Zigzag on Geopolitical News, Ending Week Where They Started

The trading week of January 20-23, 2026, exemplified the market’s sensitivity to geopolitical headline risk, with major indices demonstrating a distinctive pattern of sharp sell-offs followed by rapid recovery. According to the Wall Street Journal [1], the Dow Jones Industrials and S&P 500 edged lower on Friday, effectively ending the week where they began despite substantial volatility in between.

The primary market driver throughout the week was the Trump administration’s evolving stance on international trade policy. On Monday and Tuesday, markets reacted negatively to tariff threats against eight European nations scheduled for implementation on February 1 [2], with the S&P 500 dropping 1.00% and the Dow Jones falling 1.05%. However, the narrative shifted dramatically on Wednesday when President Trump announced he would no longer impose tariffs on European imports following diplomatic discussions, triggering a sharp market rally [3].

A secondary catalyst emerged with the announcement of a “deal framework” with NATO Secretary General Mark Rutte regarding Greenland, which helped ease broader geopolitical tensions that had weighed on risk assets earlier in the week [3][4]. This diplomatic development was cited as contributing to the mid-week recovery in equity valuations.

The trading data reveals a compelling narrative of resilience and volatility [0]:

The NASDAQ’s outperformance (+2.38%) suggests technology sector strength persisted despite broader geopolitical uncertainty, while the Russell 2000’s Friday decline of 1.61% indicates small-cap stocks faced renewed pressure as the week concluded [0].

Friday’s sector performance revealed important market positioning preferences [0]. Basic Materials surged +1.73%, potentially reflecting expectations for infrastructure spending or commodity demand. Communication Services (+1.06%) and Consumer Defensive (+0.81%) demonstrated investor appetite for both growth and defensive positioning simultaneously.

The significant underperformance of Financial Services (-1.65%) warrants particular attention, as this sector often serves as a barometer for economic growth expectations. Banks and financial institutions faced headwinds amid the evolving interest rate environment and uncertainty surrounding Federal Reserve policy [5].

Technology’s modest gain (+0.77%) on Friday suggests cautious optimism heading into the earnings season, with investors seeking quality exposure while remaining alert to company-specific developments [0].

Intel (INTC) emerged as a critical market catalyst following its earnings report on Thursday afternoon. The chipmaker’s quarterly results were closely scrutinized given its 47% stock price gain over the preceding month, reflecting Wall Street’s growing optimism about the company’s turnaround prospects [5]. The negative post-earnings reaction contributed to Friday’s market volatility, highlighting how individual corporate results can overshadow broader macroeconomic narratives.

Moderna (MRNA) provided a positive counterpoint, rising 5% after reporting encouraging results from skin cancer vaccine trials [5]. This performance demonstrates the pharmaceutical and biotechnology sectors’ continued ability to generate headline-driven momentum based on clinical developments.

GE Aerospace fell approximately 5% during Thursday’s session [5], while Mobileye (MBLY) dropped 6% in premarket trading after forecasting annual revenue below Wall Street expectations [5]. These individual stock movements underscore the importance of company-specific fundamentals amid headline-driven market conditions.

The temporary nature of the tariff reversal and Greenland deal framework introduces significant uncertainty for near-term market positioning. Markets are essentially pricing in a benign geopolitical environment, but any resumption of trade tensions could trigger rapid repricing [1][2]. The information gaps regarding specific terms of the tariff suspension and the precise parameters of the Greenland agreement leave investors exposed to headline risk.

Intel’s post-earnings weakness signals potential vulnerability in the technology sector as earnings season progresses. With Big Tech earnings under scrutiny and AI investment thesis facing evaluation, the concentration of market gains in technology names presents concentration risk [5].

The Federal Reserve’s policy stance remains a critical macro variable. Markets await the PCE price index release— the Fed’s preferred inflation gauge—for clues about the interest rate trajectory [5]. Any unexpected inflation data could reshape rate expectations and impact rate-sensitive sectors including Real Estate and Utilities.

The market’s ability to recover from Monday’s declines and essentially return to flat weekly performance suggests strong underlying demand for equities despite headline risk. This resilience indicates potential opportunities for tactical entry points during periods of geopolitical-induced volatility.

Basic Materials’ leadership performance may signal early positioning for infrastructure or manufacturing policy implementation, presenting potential opportunities in commodity-linked equities [0]. The sector’s outperformance coincided with the easing of trade tensions, suggesting investors are reevaluating global growth expectations.

Technology’s continued strength, despite individual stock volatility, supports the case for quality exposure in innovation-linked companies. The NASDAQ’s 2.38% weekly gain demonstrates sustained investor confidence in the sector’s fundamentals [0].

Investors should monitor upcoming data releases including the PCE inflation report, employment figures, and manufacturing data for insights into economic trajectory. Corporate guidance from major technology companies regarding AI investments and capital spending plans will be critical for validating current valuations. Any developments in the tariff freeze or Greenland negotiations could serve as near-term catalysts.

The week of January 20-23, 2026, demonstrated the market’s capacity for rapid repricing based on geopolitical developments while maintaining underlying fundamental stability. Major indices recovered from Monday’s sharp declines to post modest weekly gains, with the NASDAQ leading at +2.38% [0].

Geopolitical catalysts—specifically the tariff threat reversal and Greenland deal framework announcement—served as primary market drivers, with individual stock catalysts including Intel’s earnings report adding to Friday’s volatility [1][3][5]. Sector rotation favored Basic Materials while Financial Services lagged significantly [0].

The upcoming PCE inflation report and Big Tech earnings will be critical in determining whether the current market resilience can be sustained. The temporary nature of geopolitical agreements introduces uncertainty that warrants careful attention to headline developments while maintaining focus on company-specific fundamentals and earnings quality.