Reaction to President Trump's threat to impose new tariffs on the US's closest European allies sent stocks tumbling Tuesday. The Dow Jones industrial average dropped 1.8 percent while the S&P 500 lost 2.1 percent and the Nasdaq plunged by 2.4 percent, with the indexes ending near the day's worst levels. US Treasury yields and oil prices rose while the dollar fell.

The big risk off move came as top Western European leaders said they would not capitulate to Trump's threat to take Greenland and spoke of the end to the current global order. Trump told reporters, 'You'll find out, when asked how far he is prepared to go to control the island. He also predicted a deal would be worked out for the US to buy Greenland.

Stock losses were nearly across the board. Magnificent Seven shares lagged, with Nvdia and Tesla among the hardest hit. Other big losers included crypto, homebuilders, software, rail, airlines, travel & leisure, and department stores. US Treasuries sold off in tandem with losses in JGBs on expectations for more fiscal stimulus in Japan and in a return of the Sell America trade on the Greenland/tariff news.

Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.

Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.