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U.S. stocks lower, led by Nasdaq

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Deepening French political crisis weighs on euro

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Gold extends rally; futures go above $4,000/oz

(Updates to afternoon, adds file photos)

By Caroline Valetkevitch

NEW YORK, Oct 7 (Reuters) - Major stock indexes fell on

Tuesday, with the S&P 500 easing after recent record highs, and

investors eyeing political upheaval in France, Japan and a U.S.

government shutdown, while gold futures hit $4,000 an ounce for

the first time.

Demand for safe-haven

gold

has been driven in part by uncertainty over the U.S.

shutdown as well as expectations for another U.S. interest rate

cut. U.S. gold futures for December delivery settled at

$4,004.4, up 0.7%.

The euro fell against the U.S. dollar for a second day as

investors awaited developments in France, where the shock

resignation of Prime Minister Sebastien Lecornu on Monday raised

concerns about the country's fiscal outlook.

The week-old U.S. government shutdown continued, but major U.S.

stock indexes had been posting record closing highs, helped by

optimism over the likelihood of rate cuts from the Federal

Reserve and over artificial intelligence-related dealmaking.

"With tech stocks and stocks being at all-time highs and gold

being at all-time highs, something has to give," said Jake

Dollarhide, chief executive officer of Longbow Asset Management

in Tulsa, Oklahoma.

"Are the nervous Nellies of gold right, or is the AI trade

correct? ... That's what we're going to find out in the weeks

and months ahead."

The Dow Jones Industrial Average fell 147.37 points,

or 0.31%, to 46,548.47, the S&P 500 fell 28.65 points, or

0.43%, to 6,711.63 and the Nasdaq Composite fell 158.71

points, or 0.69%, to 22,782.96.

Shares of Tesla were down 4.1% and were the

biggest drag on the S&P 500 and Nasdaq after the company

unveiled more affordable versions of its best-selling Model Y

SUV and Model 3 sedan, as the electric-vehicle maker seeks to

reverse falling sales and waning market share.

Most S&P 500 sectors were lower, led by a more than 1%

fall in consumer discretionary. Still, shares of IBM ( IBM )

advanced 1.6% after the company announced a partnership

with AI startup Anthropic.

MSCI's gauge of stocks across the globe fell

4.64 points, or 0.47%, to 991.42.

The pan-European STOXX 600 index fell 0.17%.

French blue-chip stocks

gave up gains to close flat

after a sharp selloff on Monday triggered by Lecornu's

abrupt resignation.

President Emmanuel Macron, who is facing growing pressure to

hold snap parliamentary elections, or even resign, has given

Lecornu a chance to hold last-ditch talks with members of

various parties on Tuesday to seek a way out of the crisis.

French bond yields rose 2 basis points to

3.59%.

In Japan, investors snapped up a sale of government debt, in a

sign of easing nervousness after Sanae Takaichi, a proponent of

low rates and high spending, was elected leader of the ruling

party, prompting a selloff in domestic bonds and the currency

and sending stocks to record peaks.

The Japanese yen weakened 1.02% against the greenback

to 151.89 per dollar, while the euro was down 0.43% at

$1.1659.

Benchmark U.S. yields edged lower

as investors awaited

further comments from Fed policymakers ahead of the U.S.

central bank's meeting later this month. The yield on benchmark

U.S. 10-year notes fell 3.7 basis points to 4.125%,

from 4.162% late on Monday.

With the shutdown, investors have had to look to

independently produced data, along with remarks from monetary

policymakers, to try to get a sense of the Fed's possible rate

cut outlook.

Oil prices were little changed. A smaller-than-expected

increase to OPEC+ output in November was

offset by signs

of a possible supply glut.

U.S. crude rose 4 cents to settle at $61.73 a barrel

and Brent fell 2 cents to settle at $65.45.

Investors also digested news that the World Bank lifted its

forecasts for Chinese growth in 2025 and those for much of the

region, although it warned of slowing momentum next year.

(Additional reporting by Amanda Cooper in London and Rae Wee;

Editing by Sharon Singleton M=and Nick Zieminski)