U.S. Stocks, Dollar Steady After Steep Selloff

S&P 500 gains 0.4%

-- Stoxx Europe 600 sheds 1%, Nikkei off 1.3%

-- WSJ Dollar Index rises 0.2%

U.S. stock indexes rebounded Thursday from their worst selloff of the year as investors lifted shares of financial and technology companies.

The Dow Jones Industrial Average rose 58 points, or 0.3%, to 20665, led by gains in Apple and Goldman Sachs Group. The S&P 500 added 0.4%, and the Nasdaq Composite rose 0.7%.

Turmoil in Washington has put the Trump administration on the defensive and renewed concerns among investors that the White House may struggle to push through proposals on tax cuts, deregulation and infrastructure spending. Bets on such policy changes had helped stocks and the U.S. dollar climb after Election Day while sending government bonds lower.

While Wednesday's declines interrupted a period of unusual calm in the markets, many say longer term, jitters in Washington are unlikely to derail the stock rally. A buoyant global economy and solid corporate earnings should help major indexes keep climbing, investors and analysts say.

Data Thursday showed the number of Americans applying for first-time unemployment benefits fell last week for the third consecutive time in a fresh sign of steady job creation.

"I still continue to go back to the economy when I'm talking to clients. As long as the U.S. economy remains in a good foundation ... that creates a supportive environment for equities," said Shannon Saccocia, head of asset allocation & portfolio strategy at Boston Private Wealth.

U.S. government bonds edged lower Thursday, with the yield on the 10-year U.S. Treasury note rising to 2.222%, according to Tradeweb, from 2.216% Wednesday. Yields rise as bond prices fall. On Wednesday, Treasury yields posted their biggest one-day decline since the week of the U.K. referendum in June.

The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, inched up 0.3% after logging its worst session since March.

Shares of financial and technology companies, among the worst hit in Wednesday's stock selloff, also rebounded Thursday. Financial stocks in the S&P 500 rose 0.8%, lifted by gains in Morgan Stanley and Goldman Sachs, while technology stocks rose 0.6% as Apple shares climbed 1.9%.

Some investors caution that further signs of dissension in Washington could put pressure on stocks, especially if they suggest a delay in tax cuts, which many hope will boost corporate earnings.

"Two weeks ago, we were talking about policy, and now we're talking about all of the political firestorm swirling around the White House," said Brett Wander, CIO for fixed income at Charles Schwab Investment Management.

Elsewhere, the Stoxx Europe 600 fell 0.4% amid declines in banks, miners and auto companies.

Earlier, Japan's Nikkei Stock Average fell 1.3% as a global flight to haven assets boosted the value of the yen, weighing on the country's exporters, particularly in the auto sector. Declines in Japanese shares came despite economic data that showed first-quarter gross domestic product expanded 2.2% from a year earlier.

--Kenan Machado contributed to this article.

Write to Akane Otani at akane.otani@wsj.com and Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

May 18, 2017 11:05 ET (15:05 GMT)