By Lewis Krauskopf

NEW YORK (Reuters) - The dollar stumbled on Tuesday and U.S. Treasury yields fell on a fresh setback to U.S. President Donald Trump's domestic agenda, while U.S. and European stock indexes struggled after a heavy batch of earnings reports.

The collapse of his fellow Republicans' push to repeal and replace Obamacare with their own healthcare bill in the U.S. Senate again raised doubts in financial markets about Trump's ability to enact tax cuts and infrastructure spending.

The dollar <.DXY> fell 0.51 percent against a basket of key currencies, setting a 10-month low and extending its 2017 decline to more than 7 percent.


"It pushes out the rest of the agenda. It’s hard to do a tax reform in the style that it was campaigned on," said Art Hogan, chief market strategist at Wunderlich Securities in New York. "The healthcare hurdle pushes everything in Trump’s agenda to 2018."

The Dow Jones Industrial Average <.DJI> fell 85.09 points, or 0.39 percent, to 21,544.63, the S&P 500 <.SPX> lost 2.32 points, or 0.09 percent, to 2,456.82.

The Nasdaq Composite <.IXIC> added 11.05 points, or 0.18 percent, to 6,325.48.

Netflix <NFLX.O> shares soared after the streaming television company's strong customer growth, boosting the Nasdaq.

Shares of Goldman Sachs <GS.N> and Bank of America <BAC.N> fell after those banks' respective quarterly reports, and weighed on bank indexes in the United States <.SPXBK> and Europe <SX7E>.

Harley-Davidson <HOG.N> shares tumbled after the motorcycle maker's weak forecast.

In Europe, the pan-European FTSEurofirst 300 index <.FTEU3> lost 1.11 percent. Sweden's Ericsson <ERICb.ST> and fashion retailer Zalando <ZALG.DE> plummeted after their respective reports.

MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.08 percent after touching an all-time high on Monday.

In currencies, the euro <EUR=> was up 0.71 percent to $1.1559 against the dollar, and hit its strongest level against the U.S. currency since May 2016.

"The setback for Trump is a setback for the U.S. dollar," said Kathy Lien, managing director at BK Asset Management in New York. "I think that really casts doubt on the Trump administration's broader strategies."

Aside from the Trump agenda setback, there are increasing doubts about further near-term rate hikes by the Federal Reserve.

Expectations for the Fed hiking interest rates this year have been pushed back to the fourth quarter, the latest Reuters poll of economists showed. A poll conducted last month predicted the Fed would raise rates by September.

Sterling fell against the dollar and euro on Tuesday, after data showed British inflation unexpectedly slowing for the first time since October last year, lowering expectations of an interest rate increase this year.

U.S. Treasury yields fell after the latest political drama in Washington, while more data pointed to benign inflation with a drop in import prices for a second straight month.

Benchmark 10-year notes <US10YT=RR> last rose 12/32 in price to yield 2.2678 percent, from 2.309 percent late on Monday.

Yields across the globe rose sharply after Trump won the U.S. election in November on promises for tax reforms and infrastructure investment that were expected to boost growth and inflation in the world's largest economy.

Oil prices rose slightly as solid demand soaked up some of what is seen as an oversupplied market, but Ecuador's decision to opt out of a supply reduction complicated the outlook for an OPEC-led cut agreement.

U.S. crude <CLcv1> rose 0.46 percent to $46.23 per barrel and Brent <LCOcv1> was last at $48.68, up 0.54 percent on the day.

Copper <CMCU3> rose 0.14 percent to $6,004.50 a tonne. Spot gold <XAU=> added 0.7 percent to $1,242.04 an ounce.

(Additional reporting by Rodrigo Campos, Sam Forgione and Gertrude Chavez-Dreyfuss in New York, Vikram Subhedar in London,; Editing by Richard Balmforth and Nick Zieminski)

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