US STOCKS-US stocks end down as tech shares drop ahead of New Year

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By Saeed Azhar, Purvi Agarwal and Shashwat Chauhan

NEW YORK, Dec 29 (Reuters) - Wall Street's main indexes ended lower on Monday, kicking off the final week of the year on a softer note, as heavyweight technology stocks retreated from last week's gains that had pushed the S&P 500 to record highs.

The information technology sector .SPLRCT weighed on the S&P 500, as most tech and AI-linked stocks declined, such as Nvidia NVDA.O and Palantir Technologies PLTR.O.

"This is (not) the beginning of the end of the tech dominance, it'll turn out to be a buying opportunity," said Hank Smith, director and head of investment strategy at Haverford Trust.

"A big reason for that is the top tech names, excluding Tesla, do not have challenging valuations given their growth rate, the moat around their business and their financial strength, which is unparalleled."

According to preliminary data, the S&P 500 .SPX lost 23.84 points, or 0.34%, to end at 6,906.10 points, while the Nasdaq Composite .IXIC lost 118.75 points, or 0.50%, to 23,474.35. The Dow Jones Industrial Average .DJI fell 242.43 points, or 0.50%, to 48,468.54.

Tesla TSLA.O fell sharply after hitting a record high last week, weighing on the consumer discretionary sector .SPLRCD.

Materials .SPLRCM slipped, with precious metal miners sliding as silver XAG= dropped sharply after topping $80 per ounce for the first time, while gold XAU= also fell after back-to-back record highs last week.

Conversely, energy stocks .SPNY gained, tracking a 2% rise in oil prices.

Bank stocks .SPXBK also retreated after a strong rally this year. Citigroup C.N, among major gainers this year due to progress on resolving some regulatory problems, was among major decliners.

Stocks pulled back after the S&P 500 was within 1% of the 7,000-point mark. The blue-chip Dow hit a record closing high last week.

Some investors were hoping for a "Santa Claus rally", a seasonal phenomenon where the S&P 500 typically posts gains in the last five trading days of the year and the first two in January, according to Stock Trader's Almanac.

All three indexes were headed for firm monthly gains, with the Dow and S&P 500 on pace for their eighth consecutive month in the green.

The bull market, which began in October 2022, stayed intact despite concerns over high valuations of technology companies and market volatility. With traders still optimistic about AI, interest-rate cuts and a resilient economy, all three main indexes are set for their third consecutive yearly gain.

Most strategists also expected gains in 2026.

With expectations for continued global economic expansion and further easing by the Federal Reserve, it would be unusual to see a significant equity setback or bear market without a recession, said Peter Oppenheimer, chief global equities strategist at Goldman Sachs, in a recent note.

On the macro front, minutes from the Fed's previous meeting and a weekly reading of jobless claims will be on the radar in an otherwise data-light week.

The S&P 500 has added about 17% so far this year, as the frenzy to capitalize on AI helped the U.S. benchmark overtake Europe's STOXX 600 .STOXX, despite investors diversifying away from U.S. stocks earlier in the year.

DigitalBridge DBRG.N surged, with Japan's SoftBank Group 9984.T set to acquire the digital infrastructure investor in a deal valued at $4 billion.

(Reporting by Purvi Agarwal and Shashwat Chauhan in Bengaluru and Saeed Azhar in New York; Editing by Krishna Chandra Eluri, Daniel Wallis and David Gregorio)

((saeed.azhar@thomsonreuters.com;; +1 347 908-6341))