GLOBAL MARKETS-Stocks, dollar sink as investors rethink 'Trump trade'

(Updates prices, adds oil settlements)

* Dollar loses all gains since Trump election

* Dow down more than 300 points

* Yields fall as Trump scandals reduce fiscal stimulus hopes

* Investors question whether Trump agenda delayed

* Gold surges as Trump turmoil hits dollar, U.S. yields

By Caroline Valetkevitch

NEW YORK, May 17 (Reuters) - U.S. stocks and the dollar sold off and bond prices rallied on Wednesday as investors fled risky assets amid uncertainty about U.S. President Donald Trump's ability to deliver on tax and regulatory reform.

Reports that Trump asked then-FBI Director James Comey to end a probe into the former national security adviser have raised questions over whether Trump tried to interfere with a federal investigation.

U.S. stock market declines picked up in afternoon trading. The Dow Jones Industrial Average was down more than 300 points and the CBOE Volatility index - Wall Street's fear gauge - rose above the 14 level for the first time since April 21.

The S&P 500 was on track for its worst day since September. The dollar index has erased its post-election gains.

The news comes on the heels of a tumultuous week at the White House when Trump unexpectedly fired Comey and reportedly disclosed classified information to Russia's foreign minister about a planned Islamic State operation.

Optimism over pro-growth policies under Trump had driven a sharp rally in U.S. stocks after the Nov. 8 U.S. election. "We're getting into stall mode because of the early expectations for the Trump presidency. It's all being put well on the back burner and even off the stove. It's kind of worrisome as it could take time to muddle through this," said Joseph Benanti, managing director, senior sales trader at Rosenblatt Securities in New York.

The Dow Jones Industrial Average was down 333.24 points, or 1.59 percent, to 20,646.51, the S&P 500 had lost 38.76 points, or 1.61 percent, to 2,361.91 and the Nasdaq Composite had dropped 141.99 points, or 2.30 percent, to 6,027.88.

Both the Dow and S&P 500 fell below their 50-day moving averages for the first time since April 21.

While previous threats to Trump's plans have rattled investors, they had failed to cause any significant pull back in stocks. The VIX last week closed at 9.77, its lowest close since December 1993.

Bank stocks, which outperformed in the post-election rally, were the worst hit on Wednesday. The S&P 500 financial sector tumbled more than 3 percent, led by losses in Bank of America and JPMorgan (LSE: JPIU.L - news) .

At nearly 18 times forward earnings, the S&P 500 trades at a significant premium to its long-term average valuations of 15 times, according to Thomson Reuters (Dusseldorf: TOC.DU - news) data.

MSCI (Frankfurt: 3HM.F - news) 's gauge of stocks across the globe fell 1 percent, while European shares ended down 1.4 percent.

Several money managers said they were not yet likely to change their portfolios as a result of the latest White House news.

"We aren't likely to make major changes. We are already well positioned, but we need to think about a more negative scenario re tax reform versus what we were previously thinking," said Edward Perkin, chief equity investment officer at Eaton Vance (NYSE: EV - news) .

The dollar index, which tracks the U.S. currency against six peers and had scaled a 14-year peak of 103.82 on Jan. 3, fell 0.6 percent to its lowest level since Nov. 9, surrendering all of its "Trump bump" gains. The safe-haven Swiss franc hit six-month highs.

Prices of bonds, also seen as safe-haven assets, rallied.

Benchmark 10-year notes were up 1 point in price to yield 2.21 percent.

In commodity markets, safe-haven gold hit a two-week high, while oil prices were higher. Spot gold rose for a fifth day and was up 1.8 percent at $1,258.38 an ounce.

Brent crude gained 1.1 percent to settle at $52.21 per barrel, while U.S. light crude rose 0.8 percent to settle at $49.07.

(Additional reporting by Vikram Subhedar Marc Jones and John Geddie in London and Megan Davies and Sinead Carew in New York; Editing by Hugh Lawson and Nick Zieminski)