*

Markets to close at 1 pm ET in curtailed trading session

*

American Airlines ( AAL ) dips after tech issue briefly grounds

flights

*

Indexes up: Dow 0.4%, S&P 500 0.7%, Nasdaq 1%

(Updates to late-morning trading)

By Medha Singh and David French

Dec 24 (Reuters) - Wall Street's main indexes advanced

on Tuesday, as gains in a handful of megacap and growth stocks

bolstered benchmarks in a truncated trading session before

Christmas.

With megacap stocks having outsized influence on markets,

their performance is often a key driver of indexes. When coupled

with reduced trading volumes and few other catalysts, as many

investors take time off for the holidays, this is even more

pronounced.

All the so-called Magnificent Seven megacap stocks climbed

on Tuesday, led by the 5.1% advance by Tesla.

The automaker's rise helped push the Consumer Discretionary

1.9% higher. It was the top gainer among the nine S&P

sectors in positive territory.

Elsewhere, chip manufacturers were also buoyant. Broadcom ( AVGO )

and Nvidia ( NVDA ) were up 3% and 1.1%, respectively,

while Arm Holdings climbed 3.9%, on course to regain

much of the ground lost in the previous session when it was hit

by a lost court verdict.

Stock markets will shut at 1:00 p.m. ET on Tuesday and will

be closed for Christmas on Wednesday.

At 11.22 a.m. Eastern time, the S&P 500 gained 41.80

points, or 0.70%, to 6,015.87 points, while the Nasdaq Composite

rose 197.63 points, or 1.00%, to 19,962.51. The Dow

Jones Industrial Average climbed 173.43 points, or 0.40%,

to 43,080.38.

"Investors are breathing a sigh of relief that maybe the

hawkish rate cut last week combined with the softer PCE reading

indicate that inflation is not that big of a re-emerging

threat," said Sam Stovall, chief investment strategist of CFRA

Research.

"As a result, maybe this market will end up creeping higher

between now and the end of the year."

After a stellar run to record highs following the November

election, which sparked hopes of pro-business policies under

U.S. President-elect Donald Trump, Wall Street's rally hit a

bump this month as investors grappled with the prospect of

higher interest rates in 2025.

The U.S. Federal Reserve eased borrowing costs for the third

time this year last Wednesday, but signaled only two more

25-basis-point reductions next year, down from its September

projection of four cuts, as policymakers weigh the possibility

of Trump's policies stoking inflation.

Traders expect the Fed to leave rates in the range of 4% to

4.25% by the end of 2025, from between 3.75% and 4% about 10

days ago, according to CME's FedWatch tool.

Markets are currently in a historically strong period called

the "Santa Claus rally". The S&P 500 on average has gained 1.3%

in the last five days of December and first two days of January,

according to data from the Stock Trader's Almanac going back to

1969.

However, market participants are questioning if U.S. stocks'

climb to new record highs will be attainable in the coming days,

amid concerns about sky-high valuations and the market's overall

health.

NeueHealth ( NEUE ) soared 69% after the healthcare provider

said New Enterprise Associates, its largest shareholder, and a

group of existing investors will take the company private in a

$1.3 billion deal.

American Airlines' ( AAL ) shares were down 0.4% after the

carrier briefly grounded all its flights in the United States

due to an unspecified technical issue.