Food stocks were among the big losers, but analysts said it could be several days before the real impact of the news was understood. The delay might actually help limit knee-jerk reactions, said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee.

"Between the fact that there aren't a lot of people trading and it's year end and things are being done for tax purposes, it's real tough to make judgments on what kind of effect this is having," Berman said. "I think people are waiting to see how it carries over into the new year."

The markets will be closed today, and a half-session is planned for tomorrow. Lighter volume was also expected next week because of the New Year's holiday.

Meat producers and retailers fell after eight nations halted U.S. beef imports on news that a cow at a farm near Yakima, Wash., had tested positive for mad cow disease.

Meanwhile, a report from the Commerce Department showed orders for big-ticket factory goods dropped by 3.1 percent in November, the largest decline in more than a year. Economists forecast a 0.6 percent rise in orders for durable goods. In another report, the agency said new home sales declined by 2.4 percent in November to a seasonally adjusted annual rate of 1.08 million.

Separately, a Labor Department report suggested the pace of layoffs is stabilizing. Claims for unemployment benefits slipped last week by a seasonally adjusted 1,000 to 353,000, in line with expectations.

Although Santa Claus was there to ring the NYSE's closing bell, it was a more subdued end to the Christmas Eve session than in years past.