Stocks fall, S&P 500 ends lower after recent records; gold futures hit $4,000/oz

By Caroline Valetkevitch

NEW YORK (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 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)