GLOBAL MARKETS-Stocks fall for 4th straight session in quiet end to strong year

Updates to afternoon U.S. trading

By Chuck Mikolajczak

NEW YORK, Dec 31 (Reuters) - 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 .SPLRCT dropped by about 1%.

Some of the top S&P 500 performers on the year, including Palantir Technologies PLTR.O, Vistra Corp VST.N and Nvidia NVDA.O 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% and the Nasdaq by nearly 29%.

The Dow Jones Industrial Average .DJI fell 96.67 points, or 0.23%, to 42,477.06, the S&P 500 .SPX lost 27.63 points, or 0.47%, to 5,879.31 and the Nasdaq Composite .IXIC shed 153.60 points, or 0.79%, 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% 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 US10YT=RR reaching its highest level since May 2 at 4.641% 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 .MIWD00000PUS dipped 3.03 points, or 0.36%, to 840.80 but was set for a second-straight yearly advance after jumping nearly 16% in 2024.

In Europe, the STOXX 600 .STOXX index rose 0.51% 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%.

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 US10YT=RR added 2.4 basis points to 4.569%, reversing an earlier decline in the prior session but staying above the 4.5% 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 =USD, which measures the greenback against other major currencies, is up 6.6% on the year after surging 7.3% in the fourth quarter, its biggest quarterly jump since the first quarter of 2015.

On Tuesday, the dollar index climbed 0.35% to 108.43, with the euro EUR= down 0.46% at $1.0359. The single currency is down 6.2% on the year versus the greenback after slumping 7% in the quarter.

Against the Japanese yen JPY=, the dollar strengthened 0.27% to 157.26. Sterling GBP= softened 0.3% to $1.2513.

U.S. crude CLc1 rose 1.24% to $71.87 a barrel and Brent LCOc1 rose to $74.73 per barrel, up 1% 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.

(Reporting by Chuck Mikolajczak, additional reporting by Johann M Cherian, Pranav Kashyap and Purvi Agarwal in Bengaluru; Editing by Rod Nickel and Nick Zieminski)

((charles.mikolajczak@tr.com; @ChuckMik;))