NEW YORK (Reuters) - U.S. and European stocks fell on Thursday, along with the U.S. dollar, while U.S. Treasury yields reversed earlier declines, as political uncertainty in the United States and weak retail sector earnings reports sent investors in search of safer investments like gold and the Japanese yen.
Investors were concerned about developments relating to the firing of FBI Director James Comey late on Tuesday by U.S. President Donald Trump.
White House officials told Reuters Trump's decision had been building for months, but a turning point came when Comey refused to preview for top Trump officials his planned testimony to a Senate panel, a decision considered an act of insubordination by Trump and his aides.
"The market has continued to get a little bit ahead of itself and it’s just looking for any sort of a reason to have a pullback," said Catherine Avery, president of Catherine Avery Investment Management in New Canaan, Connecticut.
"Part of it is worry (that) the distraction that we’ve had with Comey is going to take (lawmakers') eyes off the tax reform and health care reform."
U.S. stocks trimmed losses, but the benchmark S&P 500 still posted its largest one-day percentage fall in four weeks.
A disappointing profit report by Macy's and ensuing 17-percent drop in its shares took a toll on the U.S. consumer discretionary sector, which fell 0.6 percent.
Investors will be watching April retail sales data due out on Friday for signs of whether consumers are shifting their spending away from department stores or just aren't spending.
"It's a gut check about the health of the consumer," said Phil Blancato, Chief Executive of Ladenburg Thalmann Asset Management. "It's a canary in the coalmine moment."
The Dow Jones Industrial Average fell 23.69 points, or 0.11 percent, to end at 20,919.42, the S&P 500 lost 5.19 points, or 0.22 percent, to 2,394.44 and the Nasdaq Composite dropped 13.18 points, or 0.22 percent, to 6,115.96.
A gauge of global stock markets was down 0.2 percent.
Wall Street's losses pushed U.S. Treasury yields lower after touching their highest levels since March. Further selling of Treasuries was limited by a weak 30-year auction and yields were little changed.
The pan-European STOXX 600 index fell 0.52 percent, weighed by financials.
MSCI's emerging markets index rose 0.53 percent to hit a two-year high, boosted by a second day of strong oil price gains. The index has gained 15.4 percent year to date, more than doubling the 2017 gains of the S&P.
"We are seeing relief with commodity prices trading higher," said Piotr Matys, emerging markets FX strategist at Rabobank.
But he added these were likely to be short-term gains as commodity prices could weaken again. Iron ore futures in China dipped to a four-month low on Wednesday before recovering at the close.
Oil prices rose 1 percent, extending Wednesday's 3 percent gains on the back of the biggest one-week drop in U.S. inventories so far this year and a decision by Iraq and Algeria to join Saudi Arabia in supporting an extension to supply cuts by the Organization of the Petroleum Exporting Countries.
Gold prices rose 0.47 percent to $1,224 per ounce, while copper touched its highest in a week.
Bank of England policymakers kept interest rates unchanged and indicated that they were unlikely to rise until late 2019.
Sterling fell to a one-week low of $1.2847.
The dollar fell 0.4 percent against the Japanese yen after four days of gains.
Earlier, the New Zealand dollar sank as much as 1.5 percent after the country's central bank kept a neutral bias, warning markets they were reading the outlook wrongly and expressing approval of the currency's declines this year.
Additional reporting by Claire Milhench in London; Editing by Nick Zieminski and James Dalgleish