Postelection rally in stocks is fading
Rising yields challenge stock market stability
Policy uncertainty affects pharmaceutical and defense stocks
Optimism persists due to strong earnings and growth

NEW YORK, Nov 18 Reuters A U.S. stock rally fueled by Donald Trumps election victory is stumbling, as investors contend with everything from renewed inflation worries to uncertainty over the impact of the presidentelect39;s policies.

The SP 500 fell 2 in the past week, erasing more than half its gains from a postelection surge fueled in part by optimism over the progrowth policies that are a key part of Trumps economic platform.

Though the index remains near record highs and is up 23 this year, some of that enthusiasm has been tempered in recent days.

Bets that some of Trumps policies could spur a rebound in inflation and cloud the picture for further interest rate cuts helped push the benchmark U.S. 10year yield to its highest level in more than five months on Friday, a potentially unwelcome development for stocks.

Worries over Trumps cabinet selections and plans for cutting bureaucratic excess have bruised the shares of pharmaceutical companies and government contractors. Meanwhile, Wall Street has little clarity on when, and to what extent, the presidentelect will implement his agenda.

While the market had rushed to price in the positive outcomes from Trumps economic policies, I39;m skeptical that it39;s going to be that easy, said Paul Nolte, senior wealth…