US STOCKS-Stocks end flat after Fed-induced selloff as early bounce fades

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Micron, Lennar (LEN) fall after results

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Banks firm as U.S. bond yields rise

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Q3 GDP revised higher

(Updates to market close)

By Chuck Mikolajczak

NEW YORK, Dec 19 (Reuters) - U.S. stocks ended little changed on Thursday, as an early rebound from a sharp drop in the prior session after the Federal Reserve forecast fewer-than-expected interest rate cuts and higher inflation next year.

Economic data was in sync with the Fed's view, with weekly initial jobless claims falling more than expected while gross domestic product for the third quarter was revised to show a 3.1% increase from the previously reported 2.8% pace.

"It clearly sent a message that rates weren't going to keep going down if inflation didn't continue its decline, and we've seen inflation tick up a bit here, and that's a concern to the Fed," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

"Today you would have expected, given the sell-off and the sharpness of it, you'd see a bounce today, and we are seeing one, it just isn't with a lot of conviction here."

According to preliminary data, the S&P 500 lost 5.08 points, or 0.09%, to end at 5,867.08 points, while the Nasdaq Composite lost 23.12 points, or 0.12%, to 19,369.58. The Dow Jones Industrial Average rose 14.41 points, or 0.03%, to 42,341.28.

The Dow and S&P 500 suffered their biggest one-day percentage drop since early August, while the Nasdaq suffered its biggest daily fall since July after the Fed on Wednesday said it expects to make just two 25 basis point cuts in 2025, half a percentage point less than its September forecast for the first year of the new Trump administration.

Traders now see just one quarter-point rate reduction by mid-2025, and see less than two cuts in total by the end of the year, compared with last week's expectations of three rate cuts.

Longer-dated Treasury yields were higher after the economic data, with the benchmark 10-year note reaching a near 7-month high of 4.594%.

The CBOE volatility index, Wall Street's fear gauge, eased after hitting a 5-1/2-month high of 28.32 a day earlier.

Bank stocks advanced as a rise in yields tends to improve the profitability of lenders, while the incoming Trump administration is expected to loosen regulations on the sector.

Micron slumped following its forecast of quarterly revenue and profit below estimates.

Homebuilder Lennar (LEN) shares retreated after reporting fourth-quarter results below estimates, weighing on the PHLX housing index.

(Reporting by Chuck Mikolajczak, additional reporting by Medha Singh and Purvi Agarwal in Bengaluru; Editing by Aurora Ellis)