(Updates to market close)

By Stephen Culp

NEW YORK, Dec 31 (Reuters) - Wall Street lost ground on

Tuesday as investors closed 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 closed in negative

territory, ending a languid, low-volume session that contrasted

with the tumultuous year that preceded it.

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 surged nearly 30%, while the bellwether

S&P 500 notched more than a 23% gain, marking the index's best

two-year run since 1997-1998.

The blue-chip Dow posted a near 13% advance for the

year.

According to preliminary data, the S&P 500 lost 25.14

points, or 0.43%, to end at 5,881.80 points, while the Nasdaq

Composite lost 175.99 points, or 0.90%, to 19,310.79.

The Dow Jones Industrial Average fell 28.46 points, or

0.07%, to 42,545.27.

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.

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.