After a late morning boost on Trump's firing of controversial White House strategist Steve Bannon, the dollar and U.S. equities lost their lustre as investors were left wary after a week in which Trump alienated potential allies.
Investors also questioned how much Trump's ouster of Bannon - a conservative media entrepreneur and activist who was a darling of Trump's base - would pave the way for policies such as tax reform. [nL2N1L4106]
"It's only marginally positive as it doesn't put money in anybody's pocket in the way tax reform would," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "There's still question marks on what this means and what other shoes are to drop."
Investor worries deepened about Trump's ability to deliver tax reform after he upset Republican colleagues, corporate leaders and overseas allies over his response to protests in Charlottesville, Virginia.
Trump drew fire after he seemed to equate protests by white nationalists with those of anti-fascist groups on Tuesday and then on Thursday decried the removal of statues that memorialize Civil War-era defenders of slavery.
Investors were also on edge for fear of market moving events over the weekend after a terrorist attack in Barcelona killed 13 people on Thursday.
"It seems at the moment that politics, terrorism and North Korea are driving the volatility one way or the other," said Bill Stone, global chief investment strategist at PNC Wealth Management in Philadelphia.
The Dow Jones Industrial Average <.DJI> fell 76.22 points, or 0.35 percent, to 21,674.51, the S&P 500 <.SPX> lost 4.46 points, or 0.18 percent, to 2,425.55 and the Nasdaq Composite <.IXIC> dropped 5.39 points, or 0.09 percent, to 6,216.53.
With a decline of more than 2 percent for the last two weeks, the S&P marked its weakest two-week period since before Trump was elected on November 8.
The U.S. dollar index had pared losses after the Bannon news but then fell well off its session highs in the afternoon.
The dollar index <.DXY> fell 0.25 percent, with the euro
U.S. Treasury yields were little changed as the exit of Bannon, known for his economic nationalist views, reduced the appetite for bonds.
Benchmark 10-year notes
Spot gold
Oil prices rose sharply on Friday, as the dollar fell and U.S. drillers cut rigs, feeding a rally that boosted global benchmark Brent crude to a weekly gain while U.S. crude was virtually flat on the week.
U.S. crude
The pan-European FTSEurofirst 300 index <.FTEU3> lost 0.73 percent hurt by the news from Barcelona and MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.31 percent.
(Additional reporting by Lewis Krauskopf, Caroline Valetkevitch, Dion Rabouin and Richard Leong in New York, Sujata Rao in London, Nicola Saminather in Singapore; graphic by Nigel Stephenson; Editing by Nick Zieminski and Andrew Hay)
By Sinead Carew
