By Chuck Mikolajczak

Global Stocks Decline Amid High U.S. Treasury Yields

NEW YORK (Reuters) – Global stocks declined on Tuesday as elevated U.S. Treasury yields resulted in a lackluster close in an otherwise strong year for equities.

On Wall Street, early modest gains evaporated as the tech sector dropped 1.04%.

Some of the year’s top S&P 500 performers, including Palantir Technologies (NASDAQ:PLTR), Vistra Corp, and Nvidia (NASDAQ:NVDA), closed lower as investors continued to book profits. The benchmark S&P jumped 23.3% and the Nasdaq rose 28.7% throughout the strong year of 2024.

Market Performance

The Dow Jones Industrial Average fell 29.51 points, or 0.07%, to 42,544.22. The S&P 500 dropped 25.31 points, or 0.43%, to 5,881.63, while the Nasdaq Composite slid 175.99 points, or 0.90%, to 19,310.79.

U.S. equities surged this year, with the S&P 500 on track for its fifth annual gain in six years. The two-year jump of approximately 53.19% marks the strongest back-to-back annual performance for the index since 1997-1998.

The rally has been fueled by growth expectations surrounding artificial intelligence, anticipated interest rate cuts from the Federal Reserve, and the likelihood of deregulation policies from the incoming Trump administration.

However, bond yields have risen on the Fed’s recent economic forecast and concerns that President-elect Donald Trump’s policies, including tariffs, may be inflationary. The benchmark 10-year U.S. Treasury note reached its highest level since May 2 at 4.641% last week, cooling the rally.

> “There’s no Santa Claus rally this week, but investors received the gift of gains in 2024,” said Greg Bassuk, CEO at AXS Investments in New York.
>
> “2024 was a massive year for equity gains driven by a trifecta of the AI explosion, a slew of Fed interest rate cuts, and a robust U.S. economy.”

Global Stock Performance

MSCI’s gauge of stocks across the globe dipped 2.59 points, or 0.31%, to 841.24 but was set for a second-straight yearly advance after rallying almost 16% in 2024.

In Europe, the STOXX 600 index rose 0.51% but closed the session with its biggest quarterly percentage drop in over two years, finishing 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 half-day trading sessions.

The benchmark U.S. 10-year note yield added 2.8 basis points at 4.573%, reversing an earlier decline but remaining above the problematic 4.5% mark. The yield has risen about 69 basis points this year, including a surge of over 74 basis points in the fourth quarter.

Dollar Strength and Oil Prices

Widening interest-rate differentials have increased the appeal of the dollar this year. The dollar index, which measures the greenback against other major currencies, is up 6.6% for the year after surging 7.3% in the fourth quarter, its biggest quarterly jump since Q1 2015.

On Tuesday, the dollar index climbed 0.36% to 108.44, with the euro down 0.47% at $1.0358. The euro is down 6.1% for the year against the dollar after slumping 6.5% in the quarter. Against the Japanese yen, the dollar strengthened 0.31% to 157.32, while sterling softened 0.28% to $1.2516.

U.S. crude settled up 1.03% to $71.72 a barrel and Brent settled at $74.64 per barrel, up 0.88% for the day. Data showing an expansion in Chinese manufacturing balanced with Nigeria aiming for higher output next year. Oil prices are still set to close out 2024 with their second consecutive year of declines.