*

US stocks end lower; Tesla a drag

*

Deepening French political crisis weighs on euro

*

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

(Updates with US closing levels)

By Caroline Valetkevitch

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

Tuesday, with the S&P 500 ending lower 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. government 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 shutdown is now in its seventh day.

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.

Weighing on the S&P 500 and Nasdaq were shares of Tesla

, which fell on Tuesday afternoon 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. The consumer

discretionary index dropped 1.4% and led declines

among S&P 500 sectors .

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 91.99

points, or 0.20%, to 46,602.98, the S&P 500 fell 25.69

points, or 0.38%, to 6,714.59 and the Nasdaq Composite

fell 153.30 points, or 0.67%, to 22,788.36.

Tesla shares ended 4.4% lower.

"If you look at what Tesla has done since April 2, it's a

complete U-turn in terms of stock price. It's hard to

orchestrate an announcement in the near term that's going to

match the exuberance in the stock price," said Art Hogan, chief

market strategist at B. Riley Wealth in New York.

Among gainers, shares of IBM ( IBM ) rose 1.5% after the

company announced a partnership with AI startup Anthropic.

MSCI's gauge of stocks across the globe

eased 3.93 points, or 0.39%, to 992.13.

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.

France's President Emmanuel Macron faced growing

pressure to resign or hold a snap parliamentary election to end

political turmoil that has forced the resignation of five prime

ministers in less than two years. On Tuesday, Lecornu held

last-ditch talks to form a new government.

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 1.05% against the

greenback to 151.95 per dollar, while the euro was down

0.47% at $1.1655.

Benchmark U.S. yields edged lower, with a three-year

note auction drawing strong demand, and as investors remained

confident the Fed will cut rates at its next meeting. The yield

on benchmark U.S. 10-year notes fell 3.5 basis

points to 4.127%, 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 path.

A New York Federal Reserve Bank survey showed softening

labor market expectations among consumers.

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,

while Brent fell 2 cents to settle at $65.45.

(Additional reporting by Noel Randewich in San Francisco,

Amanda Cooper in London and Rae Wee in Singapore; Editing by

Sharon Singleton, Nick Zieminski and Jamie Freed)