Recasts headline and first paragraph, updates prices and adds analyst comment

By Chibuike Oguh

NEW YORK, June 24 (Reuters) - Stocks fell on Wednesday, erasing early Wall Street gains and leaving European shares little changed, as valuation worries continued to weigh on sentiment, while the dollar climbed to a one-year high.

Technology stocks, which were hit hard on Tuesday, reversed early gains and continued their descent ahead of earnings from chipmaker Micron MU.O, whose products help power the AI boom. Sentiment has been fragile as investors priced in at least one rate hike from the Federal Reserve this year.

On Wall Street, the benchmark S&P 500 and the Nasdaq were lower while the Dow was up. Consumer discretionary, industrials and materials stocks drove gains. Energy stocks were the biggest losers as the continued flow of crude oil through the Strait of Hormuz pushed prices toward four-month lows.

The Dow Jones Industrial Average .DJI rose 0.46%, the S&P 500 .SPX fell 0.28%, and the Nasdaq Composite .IXIC fell 0.76%.

"Some of the rotation we are seeing some of it is how fast we're in AI stocks," said Brandon Pizzurro, chief investment officer at GuideStone. "It's a pause to reflect on how fast we've come in recent weeks."

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 0.31%.

MSCI's index of Asian equities outside Japan .MIAPJ0000PUS rose 0.04%. South Korea's KOSPI .KS11 gained 3.26% after dropping 10% in the prior session.

In Europe, the broader regional stock market finished roughly unchanged on the day .STOXX. A 15% plunge in shares of defence company Rheinmetall, after media reports of the German government planning to scrap a delayed multibillion-euro frigate project, was partly offset by gains in a scattering of heavyweight luxury and tech stocks.

"We're probably approaching peak hawkishness in terms of interpreting the Fed's new stance and it looks like that's what's primarily driving asset prices," said Wasif Latif, chief investment officer at Sarmaya Partners.

"Today, there's a bit of balance in equities that can be related to the bounce off the pretty meaningful selloff yesterday but also investors are trying to anticipate and position the upcoming earnings announcement from Micron."

STRAIT OF HORMUZ

Crude oil prices fell, extending this week's losses and trading near four-month lows, on signs that more tankers stranded in the Gulf are set to move out of the Strait of Hormuz.

There is a lot of uncertainty about the outlook, given the U.S. and Iran have provided conflicting accounts about what the two countries have agreed as part of their peace deal, including key elements such as nuclear inspections and control of the strait.

Brent LCOc1 fell to $73.74 per barrel to settle down 4.33% on the day.

DOLLAR JUMPS

The U.S. dollar rose for a third straight day against a basket of major currencies to its highest in a year as markets anticipate Fed rate hikes.

The euro, however, was one of the main victims of dollar strength, as investors lowered their expectations for the European Central Bank to raise rates much more this year, while pricing in a greater chance that the Fed will lift borrowing costs.

The euro EUR= was trading around its lowest in a year, down for a third day at $1.1352.

The yen JPY= was also weaker on the day, trading around 161.81, keeping markets on edge over a potential currency intervention to prop up the battered Japanese currency.

The dollar index =USD rose 0.24% to 101.63, hitting its highest level since May 2025.

Gold prices fell to a more than seven-month low under pressure from a firmer U.S. dollar.

Spot gold XAU= fell 3.2% to $3,976.73 an ounce.