US STOCKS-Wall Street slips as rising yields pressure some shares

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By Medha Singh and Purvi Agarwal

Dec 26 (Reuters) - Wall Street's main indexes drifted lower in light trading volumes on Thursday, as rising yields pressured some shares, while investors looked for a year-end boost from the so-called Santa Claus rally.

Yields on government bonds inched higher across the board, with the yield on the benchmark 10-year note US10YT=RR hitting its highest since early May at 4.64%.

Among megacap stocks, Amazon.com MZN.O> slipped 0.3%, while Meta Platforms O> shed 0.6%.

Rate-sensitive real estate stocks .SPLRCR were among the worst hit, down 0.4%, while consumer discretionary .SPLRCD fell 0.5%.

"Now we're at an inflection point on the Treasury yield, especially the 10-year ... any move higher and it tends to create equity market weakness and that's what I'm seeing this morning," said George Cipolloni, portfolio manager at Penn Mutual Asset Management.

At 09:40 a.m. ET, the Dow Jones Industrial Average .DJI fell 123.50 points, or 0.30%, to 43,173.53, the S&P 500 .SPX lost 15.13 points, or 0.25%, to 6,024.91 and the Nasdaq Composite .IXIC lost 46.45 points, or 0.23%, to 19,984.67.

Markets in Europe, London and parts of Asia were closed on Thursday.

The S&P 500 and the Nasdaq wrapped up Tuesday's truncated session with a third straight day of gains, lifted by megacap and growth stocks.

Gains in Apple AAPL.O, Tesla TSLA.O, Alphabet GOOGL.O, Amazon AMZN.O, Nvidia NVDA.O, Microsoft MSFT.O and Meta Platforms META.O accounted for more than half of the S&P 500's 28.4% total return this year, according to S&P Dow Jones Indices Senior Index Analyst Howard Silverblatt.

Without the Magnificent Seven stocks, the benchmark index's total return would have been 13.2% in 2024, Silverblatt added.

U.S. stocks have hit a speed bump this month following an election-led rally in November as they contend with the Federal Reserve's projection of fewer interest rate cuts in 2025.

The three main indexes have hit multiple record highs this year on hopes of a lower interest rate environment and the prospects of artificial intelligence boosting corporate profits. However, investors are starting to question the sustainability of the rally due to stretched valuations and as megacaps continue to attract more investor funds.

Yet, investors are hoping for a typically strong finish in the final days of the year - called the "Santa Clause rally" - a pattern attributed to low liquidity, tax-loss harvesting and investing of year-end bonuses.

The S&P 500 has gained an average of 1.3% in the last five trading days of December and the first two days of January since 1969, according to the Stock Trader's Almanac. A December without a Santa rally has been followed by a weaker-than-average year, data from LPL Financial going back to 1950 showed.

Meanwhile, a Labor Department report showed the number of new Americans filing for jobless benefits last week fell to 219,000, compared with the 224,000 expected by economists in a Reuters poll.

Cryptocurrency-related stocks were down after bitcoin BTC= fell over 3%. Coinbase Global COIN.O was off 1.4%, while Riot Platforms RIOT.O and Mara Holdings MARA.O shed over 2.4% each.

Declining issues outnumbered advancers by a 3.08-to-1 ratio on the NYSE and by a 2.03-to-1 ratio on the Nasdaq.

The S&P 500 posted two new 52-week highs and one new low while the Nasdaq Composite recorded 17 new highs and 24 new lows.

(Reporting by Medha Singh and Purvi Agarwal in Bengaluru; Editing by Anil D'Silva)

((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; X, formerly Twitter: @medhasinghs;))