By Riva Gold
U.S. stocks fell, the dollar slid to a one-month low and government bonds strengthened Tuesday, reversing some postelection trades.
Investors betting on higher growth and inflation under President-elect Donald Trump have sent the dollar and shares of financial and industrial companies higher while selling long-dated government debt and gold. Yet in recent weeks, many of the most popular trades have stalled.
That has kept stocks' gains in check. On Tuesday, the Dow Jones Industrial Average fell 31 points, or 0.2%, to 19855. The S&P 500 declined 0.2% and the Nasdaq Composite lost 0.4%.
Shares of financial companies in the S&P 500slid 1.5% and were among the worst performers in the broad index. Morgan Stanley, which logged its strongest fourth quarter since the financial crisis, fell 2.9%.
The WSJ Dollar Index, which tracks the currency against a basket of 16 others, tumbled 1.1% to a one-month low after Mr. Trump described the currency as "too strong" in an earlier interview with The Wall Street Journal.
Government bonds climbed, with the yield on the 10-year U.S. Treasury note falling to 2.338%, according to Tradeweb, from 2.380% on Friday. Earlier, the yield had fallen to 2.307% -- its lowest intraday level since Nov. 29. Yields fall as bond prices rise.
Some investors and analysts attributed the day's action to nervousness just days ahead of the presidential inauguration, following steep moves after the November election driven by expectations that the new administration would help boost growth and inflation.
"We had this period of time wherewe rallied on potential policies, but now the market is looking for what actually comes in," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company.
Haven assets gained. Gold rose 1.5% to $1,214.50 an ounce. Shares of dividend-paying stocks, which also tend to benefit when investors are seeking safety, led gains in the S&P 500, with utilities shares rising 1.1% and the real-estate sector up 0.5%.
In Europe, stocks and bond yields pared declines and the British pound charged back from a 31-year low after Prime Minister Theresa May gave more details about her plans to take the U.K. out of the European Union.
The Stoxx Europe 600 reversed morning losses to trade down 0.1% after concerns around Mrs. May's speech sent the index to its biggest daily fall since November on Monday. The British pound rose 2.7% against the dollar to $1.2375.
"Market participants are really trading politicaltone," said Stephen Gallo, strategist at BMO Capital Markets.
While Mrs. May said in her speech that the U.K. intends to leave the European Union's single market, "the most negative aspects of her speech were already out there, and everything else was pretty levelheaded in tone," said Mr. Gallo.
German bund yields fell to 0.245% from 0.256% Monday, according to Tradeweb, and U.K. gilt yields dropped to 1.302% from 1.320%, after falling to as low as 1.252% earlier in the session.
Earlier, a stronger yen weighed on stocks in Japan, sending the Nikkei Stock Average down 1.5% in its biggest drop this year. The Shanghai Composite recovered from early losses to rise 0.2%, ending a five-day losing streak, while the Hang Seng Index added 0.5%.
Australia's S&P/ASX 200 index fell 0.8%, erasing Monday's gains, amid declines in bank and mining stocks.
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(END) Dow Jones Newswires
January 17, 2017 12:30 ET (17:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.