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MSCI's all-country world index up 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, set for strong annual gain

(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 dropped by

about 1%.

Some of the top S&P 500 performers on the year, including

Palantir Technologies ( PLTR ), Vistra Corp ( VST ) and Nvidia ( NVDA )

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 fell 96.67 points,

or 0.23%, to 42,477.06, the S&P 500 lost 27.63 points, or

0.47%, to 5,879.31 and the Nasdaq Composite 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 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

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 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 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,

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 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, the dollar strengthened

0.27% to 157.26. Sterling softened 0.3% to $1.2513.

U.S. crude rose 1.24% to $71.87 a barrel and Brent

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.