*

Wall Street indexes skid on year end profit taking, tax

harvesting

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U.S. dollar set for 7% annual gain, yen faces fourth year

of

losses

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Thin markets exacerbate moves before another abbreviated

week

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(Updates for U.S. close)

By Alden Bentley, Naomi Rovnick and Ankur Banerjee

NEW YORK/LONDON/SINGAPORE Dec 27 (Reuters) -

U.S. stocks wrapped up Christmas week on Friday with

retracements of double-digit uptrends, and, alongside the dollar

to a smaller degree, succumbed to profit taking in illiquid

markets heading into the last weekend of 2024.

Even with its slight loss on Friday, the U.S. dollar was

headed for an almost 7% annual gain, as traders anticipated

robust U.S. growth, as well as tax cuts, tariffs and

deregulation by the incoming administration of President-elect

Donald Trump, would make the Federal Reserve cautious on

rate-cutting well into 2025.

Selling in Wall Street's main indexes gathered steam

through the morning, chilling the mood after the week started

out showing the hallmarks of a classic year-end rally to crown

what was already a stellar year.

"The Santa Claus rally came a bit earlier this year, and

I think this is profit taking ahead of another holiday-shortened

week next week," said Jeff Schulze, head Of economic and market

strategy at Clearbridge Investments. "That's another reason I

think this isn't causing more apprehension heading into a

weekend. It's not uncommon for the market to hit air pockets

when the volumes are light."

Leading the decline were high-flying "Magnificent 7"

stocks like Tesla which slid 4.9%, along with

Amazon.com ( AMZN ), Microsoft ( MSFT ) and Nvidia ( NVDA ).

The S&P 500 fell 1.11%, leaving Wall Street's

benchmark with a 0.67% weekly gain. The Nasdaq Composite

ended down 1.49%, having been down more than 2% during the

session. The Dow Jones Industrial Average fell 0.77%.

For 2024, the Dow is up 14%, the S&P 500 is up 25% and

the tech-heavy Nasdaq is up 31%.

"I've heard anecdotes that pension funds are rebalancing

ahead of year-end, selling stocks and buying bonds," said Steve

Sosnick, chief market strategist at Interactive Brokers, who

added he could not verify.

"It would explain the sudden sell-off on no news. And of

course, if large funds are selling stocks en masse, the megacap

tech stocks would bear the brunt because of their heavy

weighting in major indices."

MSCI's broad global share index fell

0.59% on Friday, and was 1.45% higher for the week.

MSCI's broadest index of Asia-Pacific shares outside

Japan eased 0.1%, marking a 1.5% weekly rise,

while Tokyo's Nikkei rose 1.8%.

Europe's Stoxx 600 rose 0.67% on Friday and was

about 1% higher for the week.

"There is some potential upside left for this bull

market, but it is limited," said Luca Paolini, chief strategist

at Pictet Asset Management

"(Trump's) inauguration day is a potential inflection

point and all the (prospective) good news will be in the price

by then," Paolini added.

The dollar index, which measures the currency against

six other major currencies, eased 0.06%, with a 0.2% weekly

gain, and showed a 6.6% 2024 gain.

Dollar/yen was down 0.06%, but near Tuesday's 5-1/2

month high. The greenback was also showing a 5.4% gain this

month against the beleaguered yen and a near 12% advance for

2024. The euro, was steady, not far from November's

two-year low and showing a 5.6% loss year to date.

The BoJ held back from a rate hike this month, which

weighed on the yen. Governor Kazuo Ueda said he preferred to

wait for clarity on Trump's policies, underscoring rising angst

among central banks worldwide of U.S. tariffs hitting global

trade.

Fed Chair Jerome Powell said earlier this month that U.S.

central bank officials "are going to be cautious about further

cuts" after an as-expected quarter-point rate reduction.

The U.S. economy also faces the impact of Donald Trump, who

has proposed deregulation, tax cuts, tariff hikes and tighter

immigration policies that economists view as both pro-growth and

inflationary.

Traders, meanwhile, anticipate the Bank of Japan will keep

its monetary policy settings loose and the European Central Bank

will deliver further rate cuts, neither positive for their

currencies.

Traders are pricing in 37 basis points of U.S. rate cuts in

2025, with no reduction fully priced into money markets until

May, by which time the ECB is expected to have lowered its

deposit rate by a full percentage point to 2% as the euro zone

economy slows.

Higher U.S. rate expectations pulled the 10-year Treasury

yield, which rises as the price of the fixed income

instrument falls, to its highest since early May early on

Thursday, at 4.641%. It was last up 4.6 basis points at 4.625%.

The two-year Treasury yield, which tracks interest rate

forecasts, eased 0.4 bp to 4.328%. U.S. debt trends also sent

euro zone yields higher, with Germany's benchmark 10-year bund

yield rising 7.6 bp to 2.401% on Friday.

Elsewhere in markets, gold prices dipped 0.74% to

$2,615.54 per ounce, set for about a 27% rise for the year and

the strongest yearly performance since 2011 as geopolitical and

inflation concerns boosted the haven asset.

Oil prices firmed as investors awaited news of economic

stimulus efforts in China, the world's biggest crude importer.

Brent crude futures rose 0.67% on the day to $73.75 a

barrel, and was 1.14% higher for the week.

In cryptocurrencies, bitcoin fell 1.26% to

$94,485.00.