NEW YORK, Feb 21 - Stocks fell on Wall Street but edged higher in Europe on Friday amid uncertainty about U.S. President Donald Trump's rapid policy initiatives, including spending cuts and tariffs, and Germany's upcoming elections. Oil prices fell 2% while gold eased from record highs.

Trump has announced tariffs on several major U.S. trading partners since returning to the White House last month and unleashed a campaign to slash the 2.3 million-strong federal workforce.

"The sell-off in the last couple of days has really been about the uncertainty with the pace of change in the government," said Joshua Wein, portfolio manager at Hennessy Funds.

"We all knew there would be spending cuts and layoffs of employees, but the pace at which that is happening has given the market a new type of uncertainty that we haven't seen before."

Data released on Friday showed U.S. business activity tumbled to a 17-month low, indicating that businesses and consumers were becoming increasingly rattled by the Trump administration's policies.

The benchmark S&P 500, Dow Jones Industrial Average and Nasdaq Composite Index fell on losses in industrials, consumer discretionary, technology, and energy stocks. The three main indexes were also set to end the week lower.

In Europe, shares have been volatile this week ahead of Germany's election on Sunday. Europe's broad Stoxx 600 (.STOXX), climbed 0.52%, reversing two days of declines. It ended the week up 0.26%.

The Dow (.DJI), dropped 1.32% to 43,594.26, the S&P 500 (.SPX), fell 1.18% to 6,045.53 and the Nasdaq Composite (.IXIC), slid 1.49% to 19,665.87.

MSCI's gauge of stocks across the globe (.MIWD00000PUS), fell 0.64% to 878.07. The index is down 0.71% for the week. Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), jumped 1.37% to its highest since November 8 and gained 1.50% for the week.

Several Federal Reserve officials, including Fed Governor Adriana Kugler and Atlanta Fed President Raphael Bostic, signaled on Thursday they still feel that cooling U.S. inflation will in time allow the central bank to deliver further interest rate cuts.

The benchmark U.S. 10-year note yield fell 7.7 basis points to 4.499%.

"Ultimately, if you weigh what's been happening in the last few days, the equity market is pricing in more cuts than the bond market is," Wein said.

"I think short term, it's this uncertainty but long term, it's the potential for tax cuts, cuts in regulation, and free market forces at work as it pertains to whatever people care about in the economy."

The dollar advanced against major currencies, partly retracing losses versus the Japanese yen. The euro stumbled after a series of business activity surveys showed a sharp contraction in early February in France and only mild improvement in Germany.

The yen strengthened 0.36% to 149.05 per dollar. Against the Swiss franc , the dollar strengthened 0.06% to 0.897.

The dollar index , which measures the greenback against a basket of currencies including the yen and euro, rose 0.21% to 106.57, with the euro down 0.34% at $1.0464.

Oil prices fell 2% on supply disruptions in Russia while uncertainty loomed over a potential peace deal in Ukraine.

Brent futures dropped 2.21% to $74.79 a barrel, while U.S. West Texas Intermediate crude fell 2.36% to $70.77.

Gold prices eased as investors booked profits from the previous session's record high. Spot gold rose 0.01% to $2,939.00 an ounce. U.S. gold futures fell 0.17% to $2,935.00 an ounce.