The S&P 500 and the Dow fell Monday in holiday-thinned trading after a stopgap government funding bill averted a U.S. government shutdown and investors braced for a slower pace of rate cuts from the Federal Reserve next year.
After a solid run since the November presidential election, Wall Street's rally hit a bump this month, especially after the U.S. Federal Reserve forecast just two 25-basis-point rate reductions for 2025 - down from its September view of four cuts - and raised its annual inflation outlook.
A cooler-than-expected inflation report on Friday helped U.S. stocks recoup some losses. However, overall market sentiment was still cautious, said Thierry Wizman, strategist at Macquarie.
Money markets expect roughly two 25-bps reductions in 2025, which would bring the benchmark rate to a range of 3.75% to 4.0%, from about a 3.50% to 3.75% range two weeks ago.
"It's a Monday with very few catalysts to drive (broad market) sentiment, and we're going to have low volume, likely volatile trading as we work our way out of this year," said Art Hogan, chief market strategist, B Riley Wealth.
Trading volumes are expected to thin, with U.S. stock markets closing early on Tuesday and shut for Christmas on Wednesday.
The United States Congress passed spending legislation early on Saturday, minutes after the funding's expiration, which could have disrupted everything from law enforcement to national parks ahead of the busy Christmas travel season.
At 11:07 a.m. the Dow Jones Industrial Average fell 247.19 points, or 0.58%, to 42,593.07 and the S&P 500 lost 5.47 points, or 0.09%, to 5,925.38.
The Nasdaq Composite gained 52.79 points, or 0.27%, to 19,625.38, buoyed by gains in chipmakers and megacap stocks.
Nvidia added 1.6% and Meta Platforms rose 1.4%.
Apple's market capitalization stood at $3.84 trillion as the world's most valuable company inched closer to the $4 trillion milestone.
Markets are also entering a historically strong period for U.S. stocks. Since 1969, the last five trading days of the year, combined with the first two of the following year, have yielded an average S&P 500 gain of 1.3% - a period known as the "Santa Claus Rally", according to the Stock Trader's Almanac.
Qualcomm's shares rose 1.7% after a jury found its central processors are properly licensed under an agreement with UK-based Arm Holdings. Shares of Arm, which has vowed to seek a fresh trial, fell about 5%.
Walmart fell 3.3% after the U.S. consumer finance watchdog accused the retail giant and workforce payments company Branch Messenger of forcing more than a million delivery drivers into using accounts that cost them more than $10 million in junk fees.
Eli Lilly gained 1.7% after the U.S. Food and Drug Administration approved the drugmaker's weight-loss treatment, Zepbound, for obstructive sleep apnea. Shares of sleep apnea device makers ResMed and Inspire Medical fell about 4% each.
Declining issues outnumbered advancers by a 2.56-to-1 ratio on the NYSE, and by a 1.91-to-1 ratio on the Nasdaq.
The S&P 500 posted two new 52-week highs and 11 new lows, while the Nasdaq Composite recorded 35 new highs and 86 new lows.
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