By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
Tiffany slumps after results; Reynolds American surges on takeover news
U.S. stocks traded lower on Tuesday as investors remained cautious in the wake of President-elect Donald Trump's comments on the dollar as well as U.K. Prime Minister Theresa May's speech indicating Britain will press for a firm exit from the European Union.
U.S. markets were closed on Monday for Martin Luther King Jr. Day holiday.
The Dow Jones Industrial Average was off by 54 points, or 0.3%, at 19,834. The S&P 500 declined 7 pints, or 0.3%, to 2,267, with financials and health-care stocks leading losses, down 1%.
The Nasdaq Composite Index shed 32 points, or 0.6%, to 5,541, retreating from its all-time high set on Friday. Biotechnology stocks were hit the most, with the iShares Nasdaq Biotechnology ETF (IBB) down 2.2%.
Trump's comments on the dollar over the weekend sent the currency sharply lower. He told The Wall Street Journal in an interview that published Friday the U.S. dollar was "too strong" because China was keeping its own yuan weaker. "Our companies can't compete with them now because our currency is too strong, and it's killing us," the president-elect said in the interview (http://www.wsj.com/articles/trump-warns-on-house-republican-tax-plan-1484613766).
The dollar, which appreciated about 5% in the fourth quarter of 2016, has been drifting sideways since the start of the year. A reversal in bond yields also points to worries among investors. The 10-year Treasury prices have been rising over the past few weeks, with the yield dropping to 2.3%, its lowest level in seven weeks.
See:Trump sends shivers through stock market on 'too strong' dollar comments (http://www.marketwatch.com/story/trump-comments-on-too-strong-dollar-send-shivers-through-stock-market-2017-01-17)
Meanwhile, political news appeared to distract investors from earnings releases.
"While we think earnings will live up to expectations, the markets may focus rather on the first hundred days of the new presidency, which could lead to volatility ahead," wrote Peter Cardillo, chief market economist at First Standard Financial.
The Japanese yen , attractive to investors at times of global uncertainty, rose to Yen113.33 against the dollar (http://www.marketwatch.com/story/dollar-broadly-lower-pound-steadies-ahead-of-uk-pms-brexit-speech-2017-01-17), from Yen114.17 late Monday in North America.
See:How Trump can be a great president (http://www.marketwatch.com/story/how-trump-can-be-a-great-president-2017-01-17)
Brexit: Investors were also focused on Brexit after British Prime Minister May made comments about her vision for the country's exit from the European Union. The pound surged 2.5% (http://www.marketwatch.com/story/pound-rallies-as-may-vows-to-put-final-brexit-deal-to-parliamentary-vote-2017-01-17), trading at $1.2355 on Tuesday, after May said she'll put the terms of the country's exits from the EU to a parliamentary vote.
Read:Stocks may need a flawless earnings season to keep Trump rally going (http://www.marketwatch.com/story/stocks-need-earnings-to-be-flawless-to-keep-trump-rally-going-2017-01-14)
Another perceived safe-haven asset, gold , shot up $16 (http://www.marketwatch.com/story/nervousness-over-brexit-trump-drive-gold-to-fresh-8-week-highs-2017-01-17), or 1.3%, to $1,212.10 an ounce.
Economic docket: Away from politics, the Empire state index for January slipped to 6.5, from a revised 7.6 in December, which was an 8-month high. Any reading above zero indicates improving conditions.
New York Federal Reserve President William Dudley played down the role of inflation in monetary policy decisions. Dudley said inflation is "simply not a problem" and that a strong dollar would limit corporations' ability to raise prices.
Other Fed speakers on Tuesday include Fed Gov. Lael Brainard at 10 a.m. Eastern, and San Francisco Fed President John Williams at 5 p.m. Eastern.
Read:Some fear Trump will knock out economy as others predict a modest boost (http://www.marketwatch.com/story/some-fear-trump-will-knock-out-economy-as-others-predict-a-modest-boost-2017-01-15)
Stocks in focus:UnitedHealth(UNH) shares slumped 2.7% even as its profit and revenue beat forecasts. (http://www.marketwatch.com/story/unitedhealths-revenue-profit-tops-forecasts-2017-01-17-6485382)
(http://www.marketwatch.com/story/unitedhealths-revenue-profit-tops-forecasts-2017-01-17-6485382)See:Stocks may need a flawless earnings season to keep the Trump rally going (http://www.marketwatch.com/story/stocks-need-earnings-to-be-flawless-to-keep-trump-rally-going-2017-01-14).
Shares of Clayton Williams Energy Inc.(CWEI) shot up 37% after oil producer Noble Energy Inc.(NBL) said it would pay $2.7 billion to buy its smaller rival (http://www.marketwatch.com/story/noble-energy-in-27-billion-deal-for-clayton-williams-2017-01-17). Noble Energy shares surged 4.8%.
British America Tobacco PLC(BATS.LN) said it would pay $49.4 billion (http://www.marketwatch.com/story/bat-to-pay-49-bln-for-full-control-of-reynolds-2017-01-17) for the 57.8% of Reynolds American Inc.(RAI) that it doesn't own. Shares of Reynolds rose 3.6%.
Tiffany & Co. (TIF) shares dropped 2.5% after holiday sales results disappointed investors.
Meanwhile, Wal-Mart Stores Inc.(WMT) said it plans to create about 10,000 U.S. jobs this year (http://www.marketwatch.com/story/wal-mart-to-create-10000-us-jobs-in-nod-to-trump-2017-01-17-61035011). (http://www.marketwatch.com/story/wal-mart-to-create-10000-us-jobs-in-nod-to-trump-2017-01-17-61035011) Wal-Mart shares rose 2.3%.
Read:German minister tells Trump: 'The U.S. needs to build better cars' (http://www.marketwatch.com/story/german-minister-to-trump-after-tax-threat-the-us-needs-to-build-better-cars-2017-01-16)
Other markets: The FTSE 100 index fell 1.1% as investors grappled with the likelihood of a hard Brexit (http://www.marketwatch.com/story/ftse-100-slips-as-may-signals-britain-will-leave-eus-single-market-2017-01-17), while stocks across the rest of Europe also weakened. In Asia , the Nikkei 225 index slid 1.5%, weighed by global political jitters and a strong yen that weighed on shares of exporters.
Oil prices were higher thanks to a weak dollar, with February crude up 1.7%, to $53.23 a barrel.
(END) Dow Jones Newswires
January 17, 2017 10:12 ET (15:12 GMT)
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