(Updates prices and comments, adds European shares' close)
* Dollar loses all gains since Trump election
* Yields fall as Trump scandals reduce fiscal stimulus hopes
* Investors question whether Trump agenda delayed
* Gold surges as Trump turmoil hits dollar, U.S. yields
By Caroline Valetkevitch
NEW YORK, May 17 U.S. stocks and the dollar
dropped and bond prices rallied on Wednesday as investors fled
risky assets amid uncertainty about U.S. President Donald
Trump's ability to deliver on tax and regulatory reform.
Reports that Trump asked then-FBI Director James Comey to
end a probe into the former national security adviser have
raised questions over whether Trump tried to interfere with a
All three major U.S. stock indexes were down more than 1
percent. The S&P 500 was briefly on track for its worst day
since Sept. 13, but pared some of those losses to put it on
track for its biggest daily fall in about two months. The dollar
index has erased its post-election gains.
The news comes on the heels of a tumultuous week at the
White House when Trump unexpectedly fired Comey and reportedly
disclosed classified information to Russia's foreign minister
about a planned Islamic State operation.
Optimism over pro-growth policies under Trump drove a sharp
rally in U.S. stocks after the Nov. 8 U.S. election.
"We're getting into stall mode because of the early
expectations for the Trump presidency. It's all being put well
on the back burner and even off the stove. It's kind of
worrisome as it could take time to muddle through this," said
Joseph Benanti, managing director, senior sales trader at
Rosenblatt Securities in New York.
The Dow Jones Industrial Average was down 254.56
points, or 1.21 percent, to 20,725.19, the S&P 500 had
lost 27.87 points, or 1.16 percent, to 2,372.8 and the Nasdaq
Composite had dropped 108.10 points, or 1.75 percent, to
Both the Dow and S&P 500 fell below their 50-day moving
averages for the first time since April 21.
Volatility spiked. The CBOE Volatility index was up
Bank stocks, which outperformed in the post-election rally,
were the worst hit. The S&P 500 financial sector tumbled
more than 2 percent, led by losses in Bank of America
At nearly 18 times forward earnings, the S&P 500 trades at a
significant premium to its long-term average valuations of 15
times, according to Thomson Reuters data.
MSCI's gauge of stocks across the globe fell
0.9 percent, while European shares ended down 1.4
Several money managers said they were not yet likely to make
changes in their portfolio as a result of the latest White House
"We aren't likely to make major changes. We are already well
positioned, but we need to think about a more negative scenario
re tax reform versus what we were previously thinking," said
Edward Perkin, chief equity investment officer at Eaton Vance.
The dollar index, which tracks the U.S. currency against six
peers and had scaled a 14-year peak of 103.82 on Jan. 3, fell
0.4 percent to its lowest level since Nov. 9, surrendering all
of its "Trump bump" gains.
U.S. Treasury yields fell, with benchmark 10-year notes
up 23/32 in price to yield 2.25 percent, the lowest
level since April.
In commodity markets, safe-haven gold hit a two-week
high, while oil prices were higher. Spot gold rose for a fifth
day and was up 1.8 percent at $1,258.38 an ounce.
Brent crude was up 1.6 percent at $52.49 per barrel,
while U.S. light crude rose 1.4 percent to $49.34.
(Additional reporting by Vikram Subhedar Marc Jones and John
Geddie in London and Megan Davies and Sinead Carew in New York;
Editing by Hugh Lawson and Nick Zieminski)