NEW YORK :Global stocks declined on Tuesday, giving back earlier gains and were on track for a fourth straight daily fall, as elevated U.S. Treasury yields have contributed to a lackluster end to an otherwise strong year for equities.
On Wall Street, modest gains in the initial stages of trading evaporated, as the tech sector dropped by about 1 per cent.
Some of the top S&P 500 performers on the year, including Palantir Technologies , Vistra Corp and Nvidia were all lower on the session as investors continued to book profits at the end of strong year that has seen the benchmark S&P jump more than 23 per cent and the Nasdaq by nearly 29 per cent.
The Dow Jones Industrial Average fell 96.67 points, or 0.23 per cent, to 42,477.06, the S&P 500 lost 27.63 points, or 0.47 per cent, to 5,879.31 and the Nasdaq Composite shed 153.60 points, or 0.79 per cent, to 19,333.19.
U.S. equities have surged this year, with the S&P 500 on track for its fifth annual gain in the past six years. The two-year jump of about 53 per cent would mark the strongest back-to-back annual performance for the index since 1997-1998.
The rally has been fueled by growth expectations surrounding artificial intelligence, expected rate cuts from the U.S. Federal Reserve, and more recently the likelihood of deregulation policies from the incoming Trump administration.
But the recent economic forecast from the Fed, along with worries that President-elect Donald Trump’s policies such as tariffs may prove inflationary, have sent yields higher, with the benchmark 10-year U.S. Treasury note reaching its highest level since May 2 at 4.641 per cent last week, helping to cool the rally.
“(The) market will experience greater volatility in 2025 as I believe the market is pricey. We could see additional profit taking in 2025,” said Sam Stovall, chief investment strategist with CFRA Research.
“Investors will end up with another positive year at the end, but it’ll be a pretty bumpy ride.”
SECOND-STRAIGHT YEARLY GAIN
MSCI’s gauge of stocks across the globe dipped 3.03 points, or 0.36 per cent, to 840.80 but was set for a second-straight yearly advance after jumping nearly 16 per cent in 2024.
In Europe, the STOXX 600 index rose 0.51 per cent but closed out the session with its biggest quarterly percentage drop in more than two years. It ended 2024 with a gain of 5.99 per cent.
Trading volumes were subdued ahead of the New Year holiday on Wednesday. Stock markets in Germany, Italy and Switzerland were closed on Tuesday, while those in the UK, Spain and France had a half-day trading session.
The yield on benchmark U.S. 10-year notes added 2.4 basis points to 4.569 per cent, reversing an earlier decline in the prior session but staying above the 4.5 per cent mark that many analysts see as problematic for equities. The yield has risen about 69 basis points this year, including a surge of more than 74 bps in the fourth quarter.
Widening interest-rate differentials have increased the appeal of the U.S. dollar this year. The dollar index, which measures the greenback against other major currencies, is up 6.6 per cent on the year after surging 7.3 per cent in the fourth quarter, its biggest quarterly jump since the first quarter of 2015.
On Tuesday, the dollar index climbed 0.35 per cent to 108.43, with the euro down 0.46 per cent at $1.0359. The single currency is down 6.2 per cent on the year versus the greenback after slumping 7 per cent in the quarter.
Against the Japanese yen, the dollar strengthened 0.27 per cent to 157.26. Sterling softened 0.3 per cent to $1.2513.
U.S. crude rose 1.24 per cent to $71.87 a barrel and Brent rose to $74.73 per barrel, up 1 per cent on the day as data showing an expansion in Chinese manufacturing was balanced by Nigeria targeting higher output next year. Oil prices were still set to close out 2024 with their second straight year of declines.
