GLOBAL MARKETS-Stocks decline as yields remain elevated

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U.S., European stocks fall

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Dollar up broadly but weaker vs yen

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10-year U.S. Treasury yield falls but holds above 4.5%

(Updates to morning U.S. trading)

By Chuck Mikolajczak

NEW YORK, Dec 30 (Reuters) - Global stocks fell for a third straight session on Monday and Wall Street tumbled as the recent bout of elevated U.S. Treasury yields prompted profit taking at the end of a strong year for equities.

On Wall Street, each of the three major U.S. indexes were down more than 1% in broad selling, with all 11 of the major S&P 500 sectors in negative territory in early trading.

The benchmark 10-year U.S. Treasury yield's recent push above the 4.5% mark after the Federal Reserve signaled it would take a slower rate cut path on Dec. 18 has fueled concerns about elevated stock market valuations.

"If yields continue to hold at these levels... this will be a strong headwind for equity prices, as investors choose the relative safety of a near-guaranteed 5% return on funds in U.S. Treasuries, compared with the uncertainty of stocks, many of which are trading at or near all-time highs," said David Morrison, senior market analyst at Trade Nation.

The Dow Jones Industrial Average fell 688.67 points, or 1.60%, to 42,303.33, the S&P 500 fell 99.37 points, or 1.66%, to 5,871.49 and the Nasdaq Composite fell 371.85 points, or 1.89%, to 19,350.18.

U.S. stocks have rallied this year, with the S&P 500 up more than 23%, buoyed by growth expectations surrounding artificial intelligence, expected rate cuts from the Fed and more recently, the likelihood of deregulation policies from the incoming Trump administration.

But the recent economic forecast from the Fed, along with worries Trump's policies such as tariffs may prove to be inflationary have sent yields higher, with the 10-year reaching its highest level since May 2 at 5.641% last week.

U.S. yields were lower on the session, however, extending declines after data showed business activity in the U.S. Midwest contracted more than expected in December.

Other data showed U.S. pending home sales rose more than expected in November, a fourth straight month of gains, as buyers took advantage of better inventory despite elevated mortgage rates.

MSCI's gauge of stocks across the globe fell 11.29 points, or 1.33%, to 840.33 but is still up nearly 16% on the year.

Trading volumes were muted ahead of the New Year holiday on Wednesday. Stock markets in Germany, Italy and Switzerland are also closed on Tuesday, while those in the UK and France have a half-day trading session.

European stocks were also weaker due to elevated yields, with the 10-year German bund yield holding near six-week highs. The pan-European STOXX 600 index fell 0.68%, on track for its first decline after three straight sessions of gains.

Bond investors may also be wary of increasing supply as U.S. President-elect Donald Trump has promised tax cuts with little in the way of details for restraining government spending.

The yield on benchmark U.S. 10-year notes fell 7.2 basis points to 4.547%.

Widening interest rate differentials have boosted the appeal of the U.S. dollar, with the dollar index up 6.5% on the year against a basket of major currencies. On Monday, the index rose 0.14% to 108.13, with the euro down 0.24% at $1.0402. The single currency is down nearly 6% on the year versus the greenback.

Against the yen, the dollar weakened 0.49% to 157.04 but was still holding at levels which have recently prompted an intervention in the currency by Japanese officials.

U.S. crude rose 0.84% to $71.19 a barrel and Brent rose to $74.49 per barrel, up 0.43% on the day.

(Reporting by Chuck Mikolajczak, additional reporting by Johann M Cherian and Pranav Kashyap in Bengaluru; Editing by Susan Fenton)