US STOCKS-Wall Street coasts to the finish line of a banner year

Updates to midsession trading

By Stephen Culp

NEW YORK, Dec 31 (Reuters) - Wall Street moved lower on Tuesday as investors prepared to close the book on a remarkable year for equities, during which the U.S. stock market was powered to record highs by the twin engines of the artificial-intelligence boom and the U.S. Federal Reserve's first interest rate cuts in three-and-a-half years.

The three major U.S. stock indexes were last in negative territory, in a languid, low-volume session which contrasted with the tumultuous year about to end.

2024 included intensifying geopolitical strife, a U.S. presidential election and shifting speculation regarding the path of Fed policy in the coming year.

"There’s no Santa Claus rally this week, but investors received the gift of gains in 2024," said Greg Bassuk, chief executive officer at AXS Investments in New York. "2024 was a massive year for equity gains driven by a trifecta of the AI explosion, a slew of Fed interest rate cuts and a robust U.S. economy."

"It sets the stage for continued strength heading into 2025," Bassuk added.

For 2024, the Nasdaq has set a course for a near 29% surge, while the bellwether S&P 500 appears set to notch more than a 23% gain, which would mark the index's best two-year run since 1997-1998.

The blue-chip Dow is on a path toward a near 13% advance for the year.

For the fourth quarter, the Nasdaq has jumped more than 6%, while the S&P 500 has risen nearly 2%. The Dow remains barely positive for the October-December period.

Among the 11 major sectors of the S&P 500, communication services .SPLRCL, technology .SPLRCT and consumer discretionary .SPLRCD were the big percentage gainers, jumping 30% to 40% in the year.

Healthcare .SPXHC, real estate .SPLRCR and energy .SPNY are the only sectors set to register just single-digit gains, while the materials .SPLRCM sector is the sole 2024 decliner, dropping nearly 2%.

Looking ahead to 2025, financial markets are now pricing in about 50 basis points of additional interest rate cuts from the Fed, with investors eying stretched valuations and uncertainties surrounding tax and tariff policies from the administration of President-elect Donald Trump.

"Investors should be cautious regarding the impact of the incoming Trump administration and how that affects certain sectors," Bassuk said, adding that "the instability driven by geopolitics, specifically the Russia/Ukraine war and continued strife in the Middle East could trigger consternation" in companies and sectors with ties to the affected regions.

And Bassuk believes the AI boom still has room to grow.

"Valuations have become lofty amid the stock run up, but because we believe that the growth in AI is set to continue and move beyond hardware to software in a massive way across most sectors," he added.

The Dow Jones Industrial Average .DJI fell 90.75 points, or 0.21%, to 42,482.98, the S&P 500 .SPX lost 29.30 points, or 0.50%, to 5,877.64 and the Nasdaq Composite .IXIC lost 164.40 points, or 0.84%, to 19,322.38.

Among the 11 major sectors of the S&P 500, technology shares were suffering the largest percentage loss on the day, while energy stocks led the gainers.

Advancing issues outnumbered decliners by a 1.14-to-1 ratio on the NYSE. There were 36 new highs and 93 new lows on the NYSE.

On the Nasdaq, 1,841 stocks rose and 2,458 fell as declining issues outnumbered advancers by a 1.34-to-1 ratio.

The S&P 500 posted two new 52-week highs and one new low while the Nasdaq Composite recorded 38 new highs and 55 new lows.

(Reporting by Stephen Culp in New York
Additional Reporting by Johann M Cherian, Pranav Kashyap and Purvi Agarwal in Bengaluru
Editing by Matthew Lewis)

((stephen.culp@thomsonreuters.com; 646-223-6076;))