Major U.S. stock indexes had the worst session in eight months, while the CBOE Volatility Index jumped the most since the United Kingdom voted to leave the European Union last June, shattering the calm that gripped markets in the past month as the crisis threatened to derail the policy agenda that helped push equities to records as recently as Monday.
Both the Dow and S&P 500 fell below their 50-day moving average for first time since late April.
The S&P 500 shed 43 at 2,357, while the Nasdaq lost a whopping 158 points, or 2.57%, to finish at 6,011. The Russell 2000 index sank 30 points, or 2.2 percent, to 1,364.
However, multiple traders said this was the trigger for the brief move higher in the dollar, as well as the Dow Jones industrial average, which hit a new high for the day shortly after the initial currency move.
Prices of bonds, seen as safe-haven assets, rallied, while yields were on track for their biggest daily percentage drops since July.
The CBOE Volatility index, the most widely followed barometer of expected near-term stock market volatility, ended above the 15 level in its highest close since April 13.
The latest political turmoil in Washington has triggered a bout of risk aversion in financial markets after the extended lull of the past few weeks.
Sure enough, with the White House on the defensive, volatility gauges reflected growing anxiety among equity investors.
About 8.37 billion shares changed hands on U.S. exchanges in the busiest trading day since March 21, compared with the 6.9 billion-share average for the last 20 sessions.
US crude futures fell 1.75% to $48.21 by 7:02AM ET (11:02GMT), while Brent oil lost 1.78% to $51.28. The euro added 0.3 percent to $1.1117, extending Tuesday's 1 percent surge and heading for the highest since November 4.
In other futures trading, natural gas fell four cents to 3.19 dollars per 1,000 cubic feet.
US stocks wavered and traded in a narrow range Tuesday, as Wall Street mainly digested Home Depot's better-than-expected quarterly results and newly-released economic data.
METALS: The price of gold jumped 1.8 percent, climbing $22.30 to settle at $1,258.70 per ounce. Wholesale gasoline was little changed at $1.60 per gallon. The dollar dropped to 111.11 yen from 113.03 yen. The Nasdaq composite fell 49 points, or 0.8 percent, to 6,120.
In Europe, stocks across the continent suffered for the second day in a row, with Germany's DAX down around 0.8% by 7:16AM ET (11:16GMT), while London's FTSE 100 slumped 1.2%.
Crude futures added 1.25 percent, reversing an earlier 1.3 percent loss, with gains accelerating after the release of us government data on inventories. Hong Kong's Hang Seng index slipped 0.2 percent. "The market correlates most closely to the direction of earnings, and that direction remains positive".
A woman walks past an electronic stock board showing Japan's Nikkei 225 index and Japanese yen-U.S. dollar daily exchange rate at a securities firm Thursday, May 18, 2017, in Tokyo.
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