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Stocks drop in broad sell-off; Dow snaps 5-session win run

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All three main indexes record weekly gains though

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Amedisys ( AMED ) gains after extending UnitedHealth ( UNH ) merger

deadline

(Updates to close)

By David French

Dec 27 (Reuters) - Wall Street's holiday cheer ended

abruptly on Friday, with all three main benchmarks closing lower

in a broad-based sell-off affecting even tech and growth stocks

that had driven markets higher through much of the shortened

trading week.

The decline ended the Dow Jones Industrial Average's

five-session winning streak that had followed a 10-session

decline, its worst losing stretch since 1974.

According to preliminary data, the S&P 500 lost 65.34

points, or 1.08%, to end at 5,972.25 points, while the Nasdaq

Composite lost 294.69 points, or 1.47%, to 19,725.67.

The Dow Jones Industrial Average fell 321.73 points, or

0.74%, to 42,992.58.

"Today feels like there is quite a bit of profit-taking

across the board," said Michael Reynolds, vice president of

investment strategy at Glenmede.

"We are more than two years into a pretty strong bull

market ... so it's really not surprising to see some people

taking their profits and rebalancing their portfolios ahead of

the new year."

The sell-off thwarted the seasonal Santa Claus rally, in

which stocks traditionally rise during the last five sessions of

December and the first two of January. Since 1969, the S&P 500

has climbed 1.3% on average, according to the Stock Trader's

Almanac.

Thursday's session hinted at momentum stalling, with both

the S&P 500 and Nasdaq posting marginal losses to end

multi-session winning runs.

Rising U.S. Treasury yields had been catching investors'

attention, with the benchmark 10-year note hitting a

more than seven-month high in the previous session. The yield

hovered close to that mark on Friday, at 4.62%.

Higher yields are seen as hampering growth stocks, as they

raise borrowing costs for business expansion. These stocks,

especially the so-called Magnificent Seven technology megacaps

which had been key drivers of the market's 2024 rally, were also

caught up in Friday's sell-off.

For the second successive day, Tesla led decliners

among the group.

"We have a higher cost of capital whenever rates go up like

this, and they have gone up pretty significantly over the last

month or so," said Glenmede's Reynolds.

"Investors may just be reassessing the bets they are

taking when the cost of capital is higher, perhaps looking at

some of the valuations on the Mag 7 and wondering whether they

can find better value elsewhere."

Most of the 11 major S&P sectors fell. The worst performers

on Friday were the three indexes which have been 2024's leading

lights: consumer discretionary, information technology

and communication services.

Despite Friday's travails, all three indexes recorded weekly

gains.

News events helped some stocks to buck the market sell-off.

Amedisys ( AMED ) gained after the home health service

provider and insurer UnitedHealth ( UNH ) extended the deadline

to close their $3.3 billion merger.

Lamb Weston ( LW ) climbed after a filing showed activist investor

Jana Partners is working with a sixth executive to push for

changes at the French fry maker, a move which could result in a

majority of the company's board being replaced.

Trading volumes in this holiday-shortened week have been

below the average of the last six months and are likely to

remain subdued until Jan. 6. The next major focus for markets

will be the December employment report due on Jan. 10.