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MSCI's all-country world index up nearly 16% for 2024

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S&P 500 on track for best 2-year run in over 25 years

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High US yields cool year-end stock rally

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Dollar dominates with strong annual gain

(Updates to close of U.S. markets)

By Chuck Mikolajczak

NEW YORK, Dec 31 (Reuters) - Global stocks declined on

Tuesday as elevated U.S. Treasury yields again contributed to 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 ( PLTR ), Vistra Corp ( VST ) and Nvidia ( NVDA )

, closed lower on the day as investors continued to book

profits, wrapping up a strong 2024 in which the benchmark S&P

jumped 23.3% and the Nasdaq rose 28.7%.

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 and the Nasdaq Composite slid

175.99 points, or 0.90%, to 19,310.79.

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 53.19% 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, expected interest rate cuts from the

Federal Reserve, and more recently, the likelihood of

deregulation policies from the incoming Trump administration.

But bond yields have risen on the Fed's recent economic

forecast and worries that President-elect Donald Trump's

policies including on tariffs, may prove inflationary. The

benchmark 10-year U.S. Treasury note reached its

highest level since May 2 at 4.641% last week, helping to cool

the rally.

"There's no Santa Claus rally this week, but investors

received the gift of gains in 2024," said Greg Bassuk, chief

executive officer 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."

SECOND-STRAIGHT YEARLY GAIN

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 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 benchmark U.S. 10-year note yield added 2.8

basis points at 4.573%, reversing an earlier decline 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 dollar this year. The dollar index, 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 0.36% to 108.44, with

the euro down 0.47% at $1.0358. The single currency is

down 6.1% on the year versus the greenback after slumping 6.5%

in the quarter.

Against the Japanese yen, the dollar strengthened

0.31% to 157.32. 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% 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.