Wall Street's main indexes have closed 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 weighed on the S&P 500, as most tech and AI-linked stocks declined, such as Nvidia and Palantir Technologies.
"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 lost 23.84 points, or 0.34 per cent, to end at 6,906.10 points, while the Nasdaq Composite lost 118.75 points, or 0.50 per cent, to 23,474.35. The Dow Jones Industrial Average fell 242.43 points, or 0.50 per cent, to 48,468.54.
Tesla fell sharply after hitting a record high last week, weighing on the consumer discretionary sector.
Materials slipped, with precious metal miners sliding as silver dropped sharply after topping $US80 ($A120) per ounce for the first time, while gold also fell after back-to-back record highs last week.
Conversely, energy stocks gained, tracking a two per cent rise in oil prices.
Bank stocks also retreated after a strong rally this year. Citigroup, 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 one per cent 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 per cent so far this year, as the frenzy to capitalise on AI helped the US benchmark overtake Europe's STOXX 600, despite investors diversifying away from US stocks earlier in the year.
DigitalBridge surged, with Japan's SoftBank Group set to acquire the digital infrastructure investor in a deal valued at $US4 billion.
