U.S. stocks retreated on Tuesday as investors remained cautious in the wake of President-elect Donald Trump’s charge that a strong dollar is hurting the economy.

The Dow Jones Industrial Average DJIA, -0.46% slid 58.96 points, or 0.3%, to close at 19,826.77. The S&P 500 index SPX, -0.84% declined 6.75 points, or 0.3%, to end at 2,267.89, with financials and health-care stocks leading the losses. U.S. markets were closed on Monday for Martin Luther King Jr. Day holiday.

“There is a lot going on this week, making investors slightly cautious. For example, the Davos meeting is where a confrontation between globalization and populism is on full display,” said Jack Ablin, chief investment officer at BMO Private Bank, referring to the World Economic Forum’s annual meeting in the Swiss Alps.

Read:Don’t worry, Xi tells Davos: China will protect globalization

The Nasdaq Composite Index COMP, -1.26% shed 35.39 points, or 0.6%, to finish at 5,538.73. Biotechnology stocks were hit hardest, with the iShares Nasdaq Biotechnology ETF IBB, -0.38% down 2%.

Trump’s comments on the dollar over the weekend sent the currency sharply lower. He told The Wall Street Journal in an interview that published Friday the U.S. currency was “too strong” because China was keeping its own yuan weaker. “Our companies can’t compete with them now because our currency is too strong, and it’s killing us,” the president-elect said in the interview.

The dollar, which appreciated about 5% in the fourth quarter of 2016, has been drifting sideways since the start of the year. A reversal in bond yields also points to worries among investors. The 10-year Treasury prices have been rising over the past few weeks, with the yield dropping to 2.3%, its lowest level in seven weeks.

See:Trump sends shivers through stock market on ‘too strong’ dollar comments

Investors are taking Trump’s comments as a sign that he may not be as open to a series of interest rate increases and a stronger dollar as had been initially projected, said Colin Cieszynski, chief market strategist at CMC Markets.

Political news appeared to distract investors from earnings releases.

“While we think earnings will live up to expectations, the markets may focus rather on the first hundred days of the new presidency, which could lead to volatility ahead,” wrote Peter Cardillo, chief market economist at First Standard Financial.

Paul Nolte, portfolio manager at Kingsview Asset Management, said the markets are still seeking clarity on the new administration’s agenda, beyond “a tweet or two from Trump on policies and economic plans.”

Geopolitics also resulted in early gyrations in equities after U.K. Prime Minister Theresa May in a speech indicated Britain will press for a firm exit from the European Union. The pound surged, trading at $1.2398 on Tuesday, after May said she’ll put the terms of the country’s exits from the EU to a parliamentary vote.

“Much of the action today is global in nature,” said Nolte.

The Japanese yen USDJPY, -0.04% , attractive to investors at times of global uncertainty, rose to ¥112.64 against the dollar, from ¥114.17 late Monday in North America.

Read:Stocks may need a flawless earnings season to keep Trump rally going

Another perceived haven asset, gold US:GCG7, shot up more than 1% to settle above $1,200 an ounce. Oil prices CLG27, were higher thanks to a weak dollar.

Trump says he’ll make a quick trade deal with the U.K.

Economic docket: Away from politics, the Empire State index for January slipped to 6.5, from a revised 7.6 in December, which was an 8-month high. Any reading above zero indicates improving conditions.

Meanwhile, New York Federal Reserve President William Dudley played down the role of inflation in monetary policy decisions. Dudley said inflation is “simply not a problem” and that a strong dollar would limit corporations’ ability to raise prices.

Stocks to Watch:UnitedHealth UNH, -0.50% shares slumped 1.4% even as its profit and revenue beat forecasts.

See:Stocks may need a flawless earnings season to keep the Trump rally going.

Shares of Clayton Williams Energy Inc. US:CWEI shot up 40% after oil producer Noble Energy Inc. NBL, +0.21% said it would pay $2.7 billion to buy its smaller rival. Noble Energy shares surged 7.1%.

British America Tobacco PLC BATS, +0.61% said it would pay $49.4 billion for the 57.8% of Reynolds American Inc. US:RAI that it doesn’t own. Shares of Reynolds rose 3.1%.

Tiffany & Co. TIF, -0.57% shares dropped 2.5% after holiday sales results disappointed investors.

Wal-Mart Stores Inc. WMT, +0.31% said it plans to create about 10,000 U.S. jobs this year. Wal-Mart shares rose 1.9%.

Other markets: The FTSE 100 index UKX, -0.47% slid as investors grappled with the likelihood of a hard Brexit, while stocks across the rest of Europe SXXP, -0.50% also weakened. In Asia ADOW, +0.35% , the Nikkei 225 index NIK, +0.17% fell 1.5%, weighed by global political jitters and a strong yen that pressured shares of exporters.

--Barbara Kollmeyer contributed to this article.