CORRECTED-US STOCKS-S&P 500 pares losses as U.S. stimulus passage expected

(Corrects paragraph 11 to reflect CBOE Volatility Index on
track for biggest one-day gain since Oct. 28, not Nov. 5.)
* Big banks jump after Fed's stress test results
* U.S. Congress set to vote on $900 bln relief bill
* Tesla slips from record high in its S&P 500 debut
* Dow up 0.2%, S&P down 0.37%, Nasdaq off 0.16%

By Stephen Culp
NEW YORK, Dec 21 (Reuters) - The S&P 500 lost ground on
Monday, but was well off its session lows as investors grappled
with the outbreak of an ominous new strain of COVID-19 along
with the likely passage of a long-awaited stimulus package.
The Nasdaq joined the S&P 500 in the red, but financials
helped the blue-chip Dow reverse course for a modest gain.
"While there's talk of the sell-off being related to the new
COVID strain, my sense is air's being let out of the balloon,"
said Oliver Pursche, president of Bronson Meadows Capital
Management in Fairfield, Connecticut. "We got ahead of ourselves
in terms of market performance and we still have significant
economic headwinds."
Congress hammered out a pandemic relief agreement on Sunday
after months of partisan wrangling. The $900 billion package,
expected to pass on Monday, includes unemployment aid and steers
money to small businesses, airlines, transit systems and vaccine
distribution.
"Last week it was pretty clear we were going to get
something, but (the stimulus package) is on the low end of what
people were hoping for," Pursche said.
But the emergence of new, highly infectious strain of
COVID-19 in Britain has raised fears of additional shutdowns,
and prompted countries around the world to shut their doors to
travelers from the United Kingdom. The news sent airline stocks sliding, even with the prospect
of $15 billion in payroll assistance for commercial carriers
included in the stimulus deal. The S&P 1500 Airline index
.SPCOMAIR was down 1.2%. Tesla Inc TSLA.O became the most valuable company ever
added to the S&P 500 and will account for about 1.69% of the
index. The electric car maker's stock dropped 4.6%. Banks bucked the trend. The U.S. Federal Reserve released
the results of its semiannual stress test late Friday and
announced relaxed restrictions on buybacks and dividends. The
S&P Banking index .SPXBK jumped 3.0%. Goldman Sachs Group GS.N surged 7.4%, surpassing its
pre-COVID share price.
The CBOE Volatility Index .VIX, a gauge of investor anxiety,
jumped to its highest level since early November and was also on
course for its biggest one-day point jump since Oct. 28.
The Dow Jones Industrial Average .DJI rose 59.24 points,
or 0.2%, to 30,238.29, the S&P 500 .SPX lost 13.55 points, or
0.37%, to 3,695.86 and the Nasdaq Composite .IXIC dropped
20.26 points, or 0.16%, to 12,735.38.
Of the 11 major sectors in the S&P 500, financials .SPSY
and tech .SPLRCT were the only percentage gainers.
Nike Inc NKE.N rose 4.7% after the athletic apparel maker
boosted its full-year revenue forecast, prompting multiple
brokers to raise their price targets. Lockheed Martin Corp LMT.N lost 1.1% after announcing it
would buy U.S. rocket engine maker Aerojet Rocketdyne Holdings
Inc AJRD.N for $4.4 billion. International Business Machines Corp IBM.N shed 2.2% after
saying it would acquire Finland-based startup Nordcloud, in its
latest effort to bolster its cloud-computing business.
Declining issues outnumbered advancing ones on the NYSE by a
2.06-to-1 ratio; on Nasdaq, a 1.41-to-1 ratio favored decliners.
The S&P 500 posted 12 new 52-week highs and no new lows; the
Nasdaq Composite recorded 153 new highs and 16 new lows.