By Sinead Carew
NEW YORK (Reuters) - World equity markets and U.S. bond yields fell while gold rose on Thursday as investors favored safe-haven investments amid growing skepticism U.S. President Donald Trump, embroiled in controversy, would achieve his economic agenda.
Adding to investor concerns was news that a van had slammed into crowds in the Spanish city of Barcelona, killing 13 people, according to media reports, in an attack police were treating as terrorism.
U.S. dollar trading was volatile and U.S. Treasury yields fell on worries Trump will be unable to deliver on campaign promises such as tax reform, even as the White House knocked down speculation that Gary Cohn, director of the National Economic Council, would resign.
A crisis deepened over Trump's response to clashes last weekend in Charlottesville, Virginia, spurred by a white supremacists protesting the removal of a Confederate statue.
After Trump blamed counter-protesters as much as the white nationalists for clashes that left one woman dead, an exodus of business executives from his advisory councils on Wednesday fueled speculation other officials, such as Cohn, would leave.
Trump on Thursday again decried the removal of pro-slavery Civil War Confederacy monuments, which have fueled U.S. racial tensions.
Rather than a single catalyst, a range of worries prompted investors to take profits, including the tense U.S. relationship with North Korea, the Barcelona attack and domestic turmoil. But some investors said the pullback would likely be temporary.
"The stock market has a great tendency to look at geopolitical or political events, have a small pullback and then just shrug its shoulders," said Burns McKinney, chief investment officer in the Dallas office of Allianz Global Investors.
"Normally it takes a day or two to digest such events, but what the market cares about is corporate earnings," which have been growing at double digits the first and second quarter, McKinney noted.
The Dow Jones Industrial Average (.DJI) fell 274.14 points, or 1.24 percent, to 21,750.73, the S&P 500 (.SPX) lost 38.1 points, or 1.54 percent, to 2,430.01 and the Nasdaq Composite (.IXIC) dropped 123.20 points, or 1.94 percent, to 6,221.91.
It was only the fourth session this year in which the S&P lost more than 1 percent in a day. The last drop of more than 1 percent came on Aug. 10.
The pan-European FTSEurofirst 300 index (.FTEU3) lost 0.59 percent and MSCI's gauge of stocks across the globe (.MIWD00000PUS) shed 0.57 percent.
The dollar was boosted by weakness in the euro after European Central Bank meeting records showed caution about removing monetary stimulus too soon, but the U.S currency was volatile as rumors about Cohn swirled.
The dollar index (.DXY) rose 0.2 percent, with the euro
The ECB news came a day after Federal Reserve meeting minutes showed some policymakers cautioning against rate increases while U.S. inflation remained weak.
U.S. Treasury yields fell as investors, unnerved by the deadly attack in Barcelona and Washington turmoil, favored safe, low-yielding bonds over stocks and other risky assets.
Benchmark 10-year notes
"There's a lot of uncertainties. That's why we haven't retraced back to where we were," said Gennadiy Goldberg, interest rate strategist at TD Securities in New York.
Oil prices rose on Thursday as investors focused on U.S. oil stockpile declines after an industry report suggested inventories at the Cushing, Oklahoma hub were declining.
A safe-haven commodity, spot gold
(For a graphic on emerging markets in 2017, click http://tmsnrt.rs/2q4eow9)
(Additional reporting by Dion Rabouin and Richard Leong in New York, Alasdair Pal, Patrick Graham in London; editing by John Stonestreet and Dan Grebler)