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U.S. stock indexes on course for annual, quarterly gains

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S&P 500 set for biggest two-year gain since 1997-98

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Indexes off: Dow 0.21%, S&P 500 0.50%, Nasdaq 0.84%

(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, technology and consumer

discretionary were the big percentage gainers, jumping

30% to 40% in the year.

Healthcare, real estate and energy

are the only sectors set to register just single-digit

gains, while the materials 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 fell 90.75 points,

or 0.21%, to 42,482.98, the S&P 500 lost 29.30 points, or

0.50%, to 5,877.64 and the Nasdaq Composite 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.