Global stocks inched higher on Tuesday, recovering from three consecutive sessions of declines driven by elevated U.S. Treasury yields. Despite recent volatility, global markets are on track to close the year with impressive gains exceeding 16%.
In the U.S., equities showed modest improvement, with all 11 major sectors of the S&P 500 posting gains, led by energy stocks. The Dow Jones Industrial Average rose 112.81 points (0.27%) to 42,688.89, while the S&P 500 added 5.82 points (0.10%) to reach 5,913.01. However, the Nasdaq Composite edged lower by 21.86 points (0.12%) to 19,463.98.
U.S. stocks have delivered a robust performance this year, with the S&P 500 up more than 24% and on pace for its fifth annual gain in six years. The index's two-year surge of approximately 54% marks its strongest consecutive annual performance since 1997-1998. This rally has been fueled by optimism surrounding artificial intelligence, anticipated Federal Reserve rate cuts, and potential deregulation policies tied to the incoming Trump administration.
Recent economic signals from the Federal Reserve, coupled with concerns that proposed tariff policies under President-elect Trump could stoke inflation, have led to rising yields. Last week, the 10-year U.S. Treasury note hit its highest level since May 2, reaching 4.641%, tempering the stock market rally.
"Further gains in equities will likely require greater clarity regarding the new administration's tax and tariff strategies," said Raffi Boyadjian, lead market analyst at XM. "Earnings expectations in the months ahead will also be critical, particularly for tech and AI-driven stocks."
Globally, MSCI’s index of world stocks climbed 0.10% to 844.64, setting the stage for a second consecutive yearly advance. In Europe, the STOXX 600 index gained 0.51% but ended the session with its steepest quarterly drop in over two years. For the year, the STOXX 600 achieved a 5.99% increase.
Trading volumes were light as markets prepared for the New Year holiday. Major European markets like Germany, Italy, and Switzerland were closed, while others, including the UK, Spain, and France, operated on shortened schedules.
In bond markets, U.S. 10-year Treasury yields eased 1.8 basis points to 4.527%, extending the prior session’s decline but remaining above the critical 4.5% threshold, which many analysts view as a pressure point for equities. The yield has climbed 69 basis points this year, with a sharp 74 basis-point rise in the fourth quarter alone.
The U.S. dollar continued its strong performance, bolstered by widening interest-rate differentials. The dollar index, which measures the greenback against a basket of major currencies, rose 0.1% to 108.16. It has gained 6.6% for the year, including a 7.5% jump in the fourth quarter, its largest quarterly gain since early 2015.
On Tuesday, the euro fell 0.2% to $1.0386, bringing its annual decline against the dollar to 6%. The yen held steady at 156.76 per dollar, while the pound edged up 0.02% to $1.2551.
In commodities, oil prices advanced modestly. U.S. crude rose 0.8% to $71.55 per barrel, while Brent crude gained 0.69% to $74.49 per barrel. Oil prices found support from data indicating growth in Chinese manufacturing but remained poised to end the year with a second consecutive annual decline.