Wall Street closed slightly lower on the final trading day of 2024, ending a year of record highs driven by artificial intelligence (AI) innovation and the US Federal Reserve's rate cuts.

The Dow Jones Industrial Average dropped 0.07% to 42,544.22, the S&P 500 declined 0.43% to 5,881.63, and the Nasdaq Composite fell 0.90% to 19,310.79 in a low-volume session.

Despite this, the year marked substantial gains, with the Nasdaq surging 28.6%, the S&P 500 climbing 23.3%, and the Dow advancing 12.9%.

"2024 was a massive year for equity gains driven by a trifecta of the AI explosion, a slew of Fed interest rate cuts, and a robust US economy," said Greg Bassuk, CEO at AXS Investments.

The S&P 500's performance over the last two years marked its best since 1997-98. Communication services, technology, and consumer discretionary sectors were the top gainers, with increases between 29.1% and 38.9%. The materials sector was the only decliner, slipping nearly 1.8%.

Looking ahead, markets anticipate further rate cuts in 2025 amidst stretched valuations and policy uncertainties tied to the incoming Trump administration. Bassuk expects AI-driven growth to continue, especially in software applications across various sectors.

Volume on US exchanges was 14.59 billion shares, slightly below the recent average of 14.81 billion.