Stocks, Dollar Fall Amid Turmoil in Washington

By Riva Gold Features Dow Jones Newswires

Stocks, the U.S. dollar and government bond yields fell as a turbulent week in Washington raised doubts about the Trump administration's ability to deliver on its agenda.

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In one of the clearest signs that investors' confidence is waning, a closely watched measure of the dollar's value was on track to give back its postelection gains Wednesday.

Stocks fell around the world. The Dow Jones Industrial Average lost 207 points, or 1%, to 20773 shortly after the opening bell, while the S&P 500 fell 0.9%, and the Nasdaq Composite lost 1.1%.

The Stoxx Europe 600 shed 0.9% and Japan's Nikkei Stock Average posted its biggest daily drop since mid-April.

Investors piled into assets they perceive as havens, sending gold up 1.6% to $1,256 an ounce, and the yield on the benchmark 10-year Treasury note down to 2.250%, according to Tradeweb, from 2.329% Tuesday. Yields fall as bond prices rise.

The ICE U.S. Dollar Index, which measures the dollar against a basket of six currencies, fell 0.3% and was on track for its lowest close since Nov. 7.

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While U.S. stocks remain close to record highs and few investors said they expect a major pullback, many said they were increasingly worried about the implementation of proposed policies such as tax cuts, deregulation and infrastructure spending following a series of developments in Washington.

Most recent were reports that President Donald Trump had allegedly asked then-FBI Director James Comey to back off the investigation of former national security adviser Michael Flynn, which prompted some congressional Republicans to call for further investigation. In a statement issued Tuesday evening, the White House denied the account.

"It's hard to judge how it plays out, but it makes it more likely to be a presidency where it's very difficult to get things done," said Kevin O'Nolan, multiasset portfolio manager at Fidelity International.

Fund managers surveyed by Bank of America Merrill Lynch view a delay in U.S. corporate tax overhauls as the fourth-biggest tail risk for markets, according to this month's survey.

Wednesday's moves come as the U.S. stock market has been quite stable lately, with the S&P 500 closing with a daily percentage change of 0.5% or less for 15 straight sessions, the longest such streak since February 1969.

While the news may trigger volatility in the short term, longer term, it is unlikely to have a major effect on the U.S. stock market, Mr. O'Nolan added. "U.S. stocks trade off earnings, earnings are linked to growth, and I don't think it's going to have a meaningful impact on growth."

In earnings news Wednesday, shares of Target rose 1.8% after the company posted better-than-expected first-quarter results even as its revenue and comparable sales decreased. The news broke with a pattern of recent weak reports from retailers that had pressured shares.

"A lot of focus is back on retailers given a lot of them are reporting pretty dismal results," said Lindsey Bell, investment strategist at CFRA Research.

At a broader level, however, "management teams have been pretty resilient with their outlook for the full year, which is a very encouraging thing," she said.

Earnings appear to be moving in the right direction, but investors may get impatient toward the end of the year if there is no progress on tax initiatives, she added.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

May 17, 2017 10:30 ET (14:30 GMT)