US STOCKS-Wall St set to end 2024 on high note as AI boom, rate cuts power bull run

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Higher Treasury yields pressure stocks

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

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Indexes off: Dow 0.15%, S&P 500 0.22%, Nasdaq 0.33%

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By Johann M Cherian and Pranav Kashyap

Dec 31 (Reuters) - Wall Street's main indexes slipped in the last trading session of 2024 as Treasury yields rose, but the benchmark S&P 500 remained on course to notch its biggest two-year rally in more than two decades.

The index has surged more than 50% in the past two years and is trading near record highs, while the Dow and the Nasdaq are also set for their second consecutive year in gains.

A nearly 100-basis point cut in interest rates in 2024 by the Federal Reserve and a rally in technology stocks in anticipation of boost to corporate profits from artificial intelligence have catapulted equities to record highs in 2024.

The tech, communications services and consumer discretionary stocks have advanced more than 30% this year.

Although AI poster-child Nvidia's (NVDA) more than 170% surge this year was smaller compared with last year, the rally helped the company notch $3 trillion in market value, while Tesla reclaimed $1 trillion level.

Tech stocks, however, led sectoral declines on Tuesday, while energy stocks added more than 1%, tracking higher crude prices.

At 11:58 a.m., the Dow Jones Industrial Average fell 62.96 points, or 0.15%, to 42,510.29, the S&P 500 lost 13.16 points, or 0.22%, to 5,893.78 and the Nasdaq Composite lost 63.85 points, or 0.33%, to 19,422.94.

Nvidia (NVDA) was down 1.2%, while the Elon Musk-led automaker slipped 0.3%. Moves are expected to be influenced by thin volumes ahead of New Year's holiday on Wednesday.

Toward the end of the year, risk-taking improved as Donald Trump's presidential win boosted bets that he would deliver on his promises to ease regulations, cut taxes and raise tariffs to help domestic businesses.

His win also powered small-cap stocks. The Russell 2000 clinched a record high and was set for a second straight year of gains with a 10% increase. Bank shares are up about 34% this year.

However, equities hit a rough patch in December, putting the S&P 500 on course for its biggest monthly decline since April as Treasury yields rose at a time when equity valuations are stretched and the Fed is concerned about likely inflationary pressures from Trump's policies.

Traders expect the first rate cut of 2025 in either March or May.

"Market will experience greater volatility in 2025 as I believe the market is pricey. We could see additional profit taking in 2025," said Sam Stovall, chief investment strategist with CFRA Research.

"Investors will end up with another positive year at the end, but it'll be a pretty bumpy ride."

Meanwhile, Trump's win has invigorated crypto stocks, with Bitcoin hitting $100,000.

MicroStrategy (MSTR) shares have jumped over 300% this year as it continues buying and holding bitcoin. The stock dropped 1.9% on Tuesday, while Coinbase and MARA Holdings (MARA) lost 1.3% and 1%, respectively.

Other areas of the market, however, have witnessed annual declines, with materials stocks down about 2%, hurt by the economic woes in top metals consumer China.

Advancing issues outnumbered decliners by a 1.75-to-1 ratio on the NYSE and by a 1.04-to-1 ratio on the Nasdaq.

The S&P 500 posted two new 52-week highs and no new lows while the Nasdaq Composite recorded 35 new highs and 42 new lows.

(Reporting by Johann M Cherian, Pranav Kashyap and Purvi Agarwal in Bengaluru; Editing by Arun Koyyur)