Wall Street ended higher on Wednesday, with the S&P 500 posting its biggest one-day percentage gain in two months, as investors were buoyed by news that a framework for an agreement on Greenland had been reached and the possibility of new US tariffs on European allies had been averted.

Both the Dow Jones Industrial Average and Nasdaq Composite also enjoyed milestone days, gaining the most in percentage terms since January 5 and December 19, respectively.

The advances stood in stark contrast to the previous day's selloff, which had been the worst daily performance by all three benchmarks since October 10, and reflected the latest episode of US President Donald Trump initially using tariff threats to push his agenda before rolling back the rhetoric when a policy victory could be declared.

"We have formed the framework of a ⁠future deal with respect to Greenland and, in fact, the entire Arctic Region," Trump wrote on his Truth Social platform.

"Based upon this understanding, I will not be imposing the Tariffs that were scheduled to go into effect on February 1st."

Wall Street benchmarks had been trading in positive territory at the time of the announcement, but soared in its wake as investors cheered the aversion of a potential new tariff war over the future of Greenland.

"I don't think who owns Greenland has any immediate impact on anything, in terms of economics," said Jason Pride, chief of investment strategy & research at Glenmede.

"What is the economic impact is whether we all start imposing tariffs on each other," he added.

The Dow Jones Industrial Average rose 1.2 percent to 49,077, the S&P 500 gained 1.2 percent, to 6,875 and the Nasdaq Composite was also up 1.2 percent to 23,224.

While light on details, Trump's announcement allowed markets to focus on underlying strengths within the US economy, including strong earnings from banks.

The latest wave of results from lenders helped send the regional banking index soaring 4.7 percent to its highest close since November 2024.

Citizens Financial Group surged 7.1 percent to a record closing high, on the back of a 31.7 percent jump in quarterly profit.

Truist Financial Corp climbed 1.8 percent after recording higher interest income and fees from investment banking.

All the S&P 500 subsectors rose, led by energy. It was buoyed by Halliburton, which gained 4.1 percent after earnings beat estimates, while EQT Corp and Expand Energy advanced 6.5 percent and 4.5 percent respectively, as natural gas prices hit a six-week high on cold weather.

United Airlines rose 2.2 percent after the carrier issued an upbeat outlook for the current quarter and the full year.

Other airlines benefited from the positive sentiment, with Delta Air Lines, American Airlines and Southwest all gaining between 1.1 percent and 2.4 percent.

Meanwhile, Netflix dropped 2.2 percent after reporting a muted outlook in its latest earnings. (Reuters)