Donald Trump's chaotic immigration moratorium and fight against Mexico expose the policy sequencing risk the new President poses to bullish stock markets which have rallied hard on his promise of tax cuts, deregulation and infrastructure spending.

As stocks swung sharply into reverse overnight on Wall Street to post their worst performance of the year and the volatility index jumped 17 per cent, Citigroup chief global political analyst Tina Fordham said the market may have "rallied too soon and got ahead of the politics". Last week, the Dow Jones Industrial Average broke through 20,000 points, extending its advance since the November 8 poll to more than 10 per cent before the overnight drop.

"In this flurry of executive orders put out last week ... none of them had anything to do with the agenda financial markets were looking for," Ms Fordham said. "The focus on social and security issues may start to give investors pause for thought."

At around 1pm in New York on Monday (5am AEDT on Tuesday), the Dow had shed 0.9 per cent and fallen back below 20,000. The broad S&P; 500 index was 0.9 per cent lower and the tech-centric Nasdaq Composite had erased 1.1 per cent.

Traders pointed to the uncertainty of Mr Trump's immigration actions and said a fall in commodity prices contributed to the declines as miners and energy producers sold off. 

Mr Trump's drastic "national security" actions - pausing the US refugee program and banning temporarily immigrants from seven Muslim-majority countries - underline how he can quickly execute populist nationalist pledges that are generally considered negative by investors.

Similarly, he has the power to unilaterally and swiftly impose trade sanctions such as tariffs, as he has threatened to do against Mexico and China.

Last week Mr Trump ordered planning to begin to construct a $US10 billion-plus wall on the US-Mexico border in a bid to check the flow of illegal immigrants, goaded on Twitter Mexico President Enrique Peña Nieto who then cancelled a scheduled meeting of the two leaders and threatened to impose border taxes on Mexican goods to pay for the wall.

'Governing harder than campaigning'

In contrast, the President's pledged economic reforms of slashing the corporate tax rate to 15 or 20 per cent from 35 per cent, overhauling the taxation of foreign profits and a mooted $US1 trillion infrastructure spending package will take months to be hammered out before any legislation is passed by Congress. 

"It would appear that they're not the administration's priority," Citi's Ms Fordham said.

"We do expect fiscal expansion and probably the best chance on tax reform we've had for some time, but those are all things that take longer via Congress and that probably means they go into the second half of the year."

Goldman Sachs expects corporate income tax cuts to juice the economy by about 0.5 of a percentage point of GDP but not until late 2017 or early 2018.

Mr Trump's preoccupation with media wars, knee jerk tweets and conflicts with Republicans and Democrats in Congress are distracting time, energy and resources from the smooth passage of pro-business policies, according to experts.

"We are adding Trump's seeming inability to play the long game as the primary tail risk to the 2017 policy agenda in Washington this year that is centered on tax reform," said Washington-based political analyst Chris Krueger of Cowen and Company.

PIMCO's head of public policy Libby Cantrill said in a recent research note that "governing is harder than campaigning" so investors needed to have a realistic expectations for policy making in 2017.

"Many of the items that President Trump and congressional Republicans are looking to tackle in 2017 – a healthcare overhaul, tax reform, infrastructure – are inherently complex and time-consuming, even with Republican majorities in both chambers of Congress," she said.

"So, while we expect policymakers to focus on advancing the Trump agenda, there is a good chance that some of these agenda items slip into 2018 given the realities of Washington."

Copper, oil decline

Goldman Sachs chief executive Lloyd Blankfein reportedly criticised the targeted immigration ban in a recorded phone message to staff, while Apple chief executive Tim Cook joined other incensed technology executives by telling employees that the iPhone maker "would not exist without immigration".

In intraday trade in New York, Delta Airways' stock price had fallen nearly 4 per cent, American Airlines was almost 6 per cent down and InterContinental Hotels Group was 2 per cent lower.

In Europe, Air France finished 2.7 per cent lower, International Consolidated Airlines Group lost 2.5 per cent.

In the wake of immigrants being detained at airports, confusion for thousands of US visa holders and international condemnation from political leaders, on Monday in Washington Mr Trump said we had a "very good day" on national security.

He blamed protesters, tears from Democratic Senate leader Chuck Schumer and a computer outage at Delta Airways for causing the mayhem.

At a meeting of small business leaders at the White House Mr Trump vowed to cut cut two regulations for every new regulation introduced and said the stock market had gone up "massively" since the election

Mr Trump pledged to do a "big number" on the "disaster" that is the Dodd–Frank Wall Street Reform and Consumer Protection Act.

Europe's STOXX 600 closed 1.1 per cent lower to record the largest one-day fall since November. The UK's FTSE 100 fell 0.9 per cent.

In London, copper slid 1.4 per cent. Oil was lower, gold edged higher.

Citi's Ms Fordham said: "I think what's important for investors who thought they should take Trump seriously but not literally, it's now time to take Trump seriously and literally."