By Chuck Mikolajczak

NEW YORK (Reuters) - A gauge of global stocks declined on Monday and U.S. Treasury yields climbed, with the benchmark 10-year note topping 4%, as investors readjusted their views for the path of interest rates from the Federal Reserve.

The U.S. 10-year note climbed to 4.033%, its highest level since Aug. 1 and first time above 4% since Aug. 8 after Friday's stronger-than-expected U.S. payrolls report fueled expectations the Fed will dial back its aggressiveness in cutting interest rates.

Expectations for a Fed rate cut of 25 basis points (bps) at the central bank's November meeting stand at 84.6%, with the market pricing in a 15.4% chance it will hold rates steady, according to CME's FedWatch Tool.

Markets were completely pricing in a cut of at least 25 basis points just a week ago, with a 34.7% chance for another outsized 50 basis-point cut after the Fed began slashing rates at its September meeting with a 50 bp cut.

"The market very quickly flipped from talking about a 50 basis-point cut to possibly no cut in November, just based on the strength of the data," said Gennadiy Goldberg, chief U.S. rates strategist at TD Securities in New York.

"It would be very strange for them to give up the ghost on additional cuts this soon after a 50-bp rate cut," Goldberg said.

On Wall Street, stocks closed lower, with energy the sole S&P 500 sector to post a gain as crude prices continued to ascend on concerns a widening conflict in the Middle East could dent supply.

The Dow Jones Industrial Average fell 398.51 points, or 0.94%, to 41,954.24, the S&P 500 fell 55.13 points, or 0.96%, to 5,695.94 and the Nasdaq Composite fell 213.94 points, or 1.18%, to 17,923.90.

MSCI's gauge of stocks across the globe fell 3.66 points, or 0.43%, to 843.74, on track for its fifth decline in six sessions. In Europe, the STOXX 600 index closed up 0.18%, erasing early declines, although gains were capped by rate-sensitive stocks such as real estate and utilities.

The yield on benchmark U.S. 10-year notes was last up 4.3 basis points to 4.024%. The 2-year note yield, which typically moves in step with interest rate expectations, climbed 5.7 basis points to 3.989% after rising to 4.027%, its highest since Aug. 20.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 3.3 basis points after briefly inverting for the first time since Sept. 18.

Major U.S. economic data is not scheduled to be released until Thursday, when the consumer price index is issued. Fed Chair Jerome Powell and other Fed officials have commented recently that the central bank has shifted its focus from combating high inflation to labor market stability.