Withdrawal of health-care plan has investors fretting about tax overhaul, infrastructure spending.
Stocks around the world fell Monday, putting the Dow Jones Industrial Average on track for its longest losing streak since 2011 as doubts percolated about the Trump administration’s ability to push through on campaign promises.
The Dow Jones Industrial Average fell 127 points, or 0.6%, to 20468. The S&P 500 lost 0.7%, and the Nasdaq Composite dropped 9%.
Government bonds and gold strengthened, while the dollar fell as investors continued to question expectations for business-friendly policies that helped propel stocks to record highs earlier this year.
On Friday, House Republican leaders ultimately abandoned their bill on a health-care plan amid a lack of support, leaving investors fretting about the likely success and party support for other complex legislative efforts, including a tax overhaul and infrastructure spending.
“There is some real concern about whether [President Donald Trump] is going to be able to get these policies through,” said Dianne Lob, managing director for equities at AB. “I think the theme for the year will be uncertainty.”
Financial shares were among the biggest decliners, falling 2.1%. Goldman Sachs Group declined 2.7% in the Dow industrials.
The CBOE Volatility Index, known as Wall Street’s “fear gauge”, hovered around its highest level this year.
The WSJ Dollar Index, which measures the U.S. currency against 16 others, fell 0.7%. The British pound was last up 1.1% at $1.2606, while the euro rose 0.9% at $1.0892.
The dollar had initially rallied after Mr. Trump’s election on the expectation that pro-growth policies, particularly tax cuts and deregulation of the financial sector, would boost the economy and prompt the Federal Reserve to raise interest rates faster than previously anticipated.
Those trades have been fading in recent weeks however, with the dollar down more than 3% so far this year, and the Mexican peso, which initially fell sharply on Mr. Trump’s election, up more than 10%.
“The Trump-related euphoria has now been almost completely priced out of the currency market,” said Vasileios Gkionakis, currency strategist at UniCredit Research.
As investors returned to assets perceived as safer, yields on 10-year Treasury notes fell to 2.352%, according to Tradeweb, from 2.396% on Friday. Yields move inversely to prices.
Commodity prices declined as investors shed a host of so-called risk assets. U.S. crude oil prices dropped 1.7% to $47.17 a barrel.
Gold, which tends to outperform in times of market stress, climbed 1% to $1,260.60 an ounce, according to FactSet.
The Stoxx Europe 600 was down 0.7%, while London’s FTSE 100 fell 0.9% as a weaker dollar also put pressure on shares of exporters. Banks, miners, industrials, and oil companies—among the best performers after the election—led losses in Europe, Asia, tracking a decline in government bond yields and commodity prices.
“Markets are questioning the high expectations built over the past few months,” said Jeremy Gatto, investment manager at Unigestion. “[Mr. Trump] did promise a phenomenal tax reform package, and the market would be disappointed if we got something smaller than expected or nothing at all.”
Still, he said, he remains quite positive on equity markets for now, citing a strengthening global economy and a lack of alternatives to stocks.
Earlier, Japan’s Nikkei Stock Average dropped 1.4% to its lowest levels since early February as the yen strengthened. Infrastructure stocks, which rose in anticipation of a Trump-driven increase in spending, were among Monday’s largest decliners in Japan, while shares of insurers who invest heavily in government bonds also came under pressure.
Most other stock markets in Asia logged modest declines, with indexes in Hong Kong down 0.7% and shares in Shanghai and Australia down 0.1%.