NEW YORK, Oct 7 (Reuters) - Major stock indexes fell on Tuesday, with the S&P 500 easing 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. 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 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.
The week-old U.S. government shutdown continued, but 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 (.DJI), fell 147.37 points, or 0.31%, to 46,548.47, the S&P 500 (.SPX), fell 28.65 points, or 0.43%, to 6,711.63 and the Nasdaq Composite (.IXIC), fell 158.71 points, or 0.69%, to 22,782.96.
Shares of Tesla (TSLA.O), were down 4.1% and were the biggest drag on the S&P 500 and Nasdaq 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.
Most S&P 500 sectors were lower, led by a more than 1% fall in consumer discretionary (.SPLRCD), opens new tab. Still, shares of IBM (IBM.N), advanced 1.6% after the company announced a partnership with AI startup Anthropic.
MSCI's gauge of stocks across the globe (.MIWD00000PUS), fell 4.64 points, or 0.47%, to 991.42. The pan-European STOXX 600 (.STOXX), index fell 0.17%.
Traders work on the floor of the American Stock Exchange (AMEX) at the NYSE in New York
Futures-options traders work on the floor at the American Stock Exchange (AMEX) at the New York Stock Exchange (NYSE) in New York City, U.S., October 2, 2025. REUTERS/Brendan McDermid Purchase Licensing Rights, opens new tab
French blue-chip stocks (.FCHI), gave up gains to close flat after a sharp selloff on Monday triggered by Lecornu's abrupt resignation.
President Emmanuel Macron, who is facing growing pressure to hold snap parliamentary elections, or even resign, has given Lecornu a chance to hold last-ditch talks with members of various parties on Tuesday to seek a way out of the crisis.
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 1.02% against the greenback to 151.89 per dollar, while the euro was down 0.43% at $1.1659.
Benchmark U.S. yields edged lower as investors awaited further comments from Fed policymakers ahead of the U.S. central bank's meeting later this month. The yield on benchmark U.S. 10-year notes fell 3.7 basis points to 4.125%, 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 outlook.
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 and Brent fell 2 cents to settle at $65.45.
Investors also digested news that the World Bank lifted its forecasts for Chinese growth in 2025 and those for much of the region, although it warned of slowing momentum next year.
Additional reporting by Amanda Cooper in London and Rae Wee; Editing by Sharon Singleton M=and Nick Zieminski
