GLOBAL MARKETS-Stocks drop as AI exuberance worries linger; US yields jump

By Caroline Valetkevitch

NEW YORK, Dec 12 (Reuters) - Major stock indexes were down sharply on Friday, with technology-related shares falling again as investors were wary of artificial intelligence bets, while the dollar and U.S. Treasury yields edged higher after recent losses.

Cloud computing company Oracle ORCL.N earlier this week flagged massive spending and weak forecasts. A warning about margins from chipmaker Broadcom AVGO.O late on Thursday added to the concerns. Technology .SPLRCT was down 2.6%, the most among major S&P 500 sectors. Broadcom shares were down 12%, while Oracle was down 4.6% and AI leader Nvidia NVDA.O was down 2.4%.

Investors were optimistic about further U.S. interest rate cuts in 2026 after the U.S. Federal Reserve cut interest rates by 25 basis points on Wednesday, in a 9-3 decision, even though policymakers signalled that it will put further reductions on pause for now. Policymakers have expressed concerns about a cooling labor market as well as inflation that remains too high.

"The data is very mixed right now and these are individuals on the Fed with different projections and different thoughts around everything," said Tony Welch, chief investment officer at SignatureFD in Atlanta.

U.S. jobless claims data on Thursday showed the number of Americans filing new applications for unemployment benefits increased by the most in nearly 4-1/2 years last week.

The Bank of England is expected to cut rates next week on Thursday. The European Central Bank is expected to keep them steady, although traders are now speculating it could hike rates in 2026. The Bank of Japan is expected to hike rates after strong signals from Governor Kazuo Ueda.

The Dow Jones Industrial Average .DJI fell 211.75 points, or 0.43%, to 48,492.26, the S&P 500 .SPX fell 72.72 points, or 1.05%, to 6,828.25 and the Nasdaq Composite .IXIC fell 378.01 points, or 1.60%, to 23,215.84.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 6.18 points, or 0.61%, to 1,009.09. The pan-European STOXX 600 .STOXX index fell 0.53%.

U.S. 10-year Treasury yields rose after two straight sessions of declines, as investors assessed commentary from a flurry of Fed speakers and a positive outlook on the economy.

Fed officials who voted against the U.S. central bank's interest rate cut this week said on Friday they are worried that inflation remains too high to warrant lower borrowing costs.

The yield on the benchmark U.S. 10-year Treasury note US10YRT-TWEB rose 4.5 basis points to 4.186% and was up nearly 5 basis points on the week, putting it on track for a second straight weekly climb.

German government bond yields rose after hitting their highest level since March earlier this week, underscoring how investors have begun pricing in euro zone rate hikes, in sharp contrast to the United States, where rates appear set to fall. Germany’s 30-year yield DE30YT=RR, more sensitive to long-term fiscal concerns, climbed to a fresh 14-year high of 3.498%, up 3.5 basis points.

DOLLAR GAINS, POUND FALLS SLIGHTLY ON UK DATA

The U.S. dollar drifted higher against major currencies, also after falling in recent sessions, but was still set for its third straight weekly drop amid the prospect of interest rate cuts by the Fed next year.

Sterling eased after data showed the UK economy unexpectedly shrank in the three months to October. Sterling GBP= weakened 0.28% to $1.3348.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro,
rose 0.15% to 98.48.

COPPER PLUNGES FROM RECORD HIGH

Copper plunged more than 3%, after hitting a record high earlier in the session, as renewed fears of the AI bubble bursting sparked a broad selloff of riskier assets.

Benchmark three-month copper CMCU3 on the London Metal Exchange fell as much as 3.5% to $11,451.50 and was trading down 2.8% at $11,537.50 as of 1700 GMT.

U.S. crude CLc1 fell 16 cents to settle at $57.44 a barrel and Brent LCOc1 fell 16 cents to settle at $61.12.