US STOCKS-Wall St drifts higher in first trading session of 2025; Tesla slides

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Weekly jobless claims at 211,000, below estimates

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Tesla down after deliveries data

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Crypto stocks rise on bitcoin strength

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Indexes up: Dow 0.26%, S&P 0.44%, Nasdaq 0.51%

(Updates with mid-session trading)

By Johann M Cherian and Purvi Agarwal

Jan 2 (Reuters) - Wall Street's main indexes edged higher in the volatile first trading session of 2025 as investors pinned their hopes on a fresh political landscape and more interest rate cuts, while Tesla slid after a dour deliveries report.

At 11:41 a.m. ET, the Dow Jones Industrial Average rose 111.85 points, or 0.26%, to 42,656.07, the S&P 500 gained 25.69 points, or 0.44%, to 5,907.32 and the Nasdaq Composite gained 98.75 points, or 0.51%, to 19,409.54.

The Russell 2000 index tracking small-cap stocks also rose 0.9%.

Seven out of the 11 S&P 500 sectors advanced, led by energy stocks, as oil prices ticked higher.

Tesla dropped 5.2% and touched a near one-month low after reporting its first fall in annual deliveries, missing CEO Elon Musk's promise of slight growth in 2024 as incentives failed to stem a decline in demand for its aging line-up of electric vehicles.

That weighed on the consumer discretionary sector, pulling it 0.2% lower.

"The real issue is that the demand for (electric vehicles) is lagging and we think the stock is massively overvalued, but people want to own it because Trump and Musk are buddies," said Jay Hatfield, CEO of Infrastructure Capital Advisors.

"But every once in a while, reality rears its head.. and you have to report sales, so that can pop these momentum stocks a little bit."

Thin trading volumes in the holiday-shortened week added some volatility to markets, while the yield on the 10-year benchmark Treasury note hovered near an eight-month high.

On the data front, jobless claims unexpectedly fell last week, consistent with a healthy labor market. Separately, a final estimate of S&P Global's manufacturing survey showed activity stood at 49.4 in December, compared with a previous estimate of 48.3.

Wall Street's main indexes had a stellar 2024, with the benchmark S&P 500 notching its best two-year run since 1997-1998. The main catalysts were the Federal Reserve commencing its interest rates easing cycle, investor hype around artificial intelligence and expectations of pro-business policies from the incoming Trump administration.

However, 2024's rally ended with the S&P 500 and the Dow marking declines for December, as markets priced in inflationary pressures from Trump's policy proposals and weighed the likelihood of it hindering the Fed's policy easing pace this year.

With inflation still above the 2% target, traders see the central bank leaving interest rates unchanged at its meeting later this month, and expect borrowing costs to be lowered by about 50 basis points by year-end, according to the CME Group's FedWatch Tool.

Equity valuations are sitting above their long-term averages, but could be justified if corporate profits stay strong.

Apple (AAPL) lost 2.2%. The iPhone maker offered rare discounts of up to $68.50 on its latest iPhone models in China.

Crypto stocks such as MicroStrategy (MSTR) and MARA Holdings (MARA) rose 4.2% each, tracking higher bitcoin prices.

Advancing issues outnumbered decliners by a 2.88-to-1 ratio on the NYSE and by a 2.32-to-1 ratio on the Nasdaq.

The S&P 500 posted one new 52-week high and 2 new lows while the Nasdaq Composite recorded 44 new highs and 13 new lows.

(Reporting by Johann M Cherian and Purvi Agarwal in Bengaluru; Editing by Devika Syamnath)