NEW YORK — U.S. stocks fell on the final trading day of the year, erasing the Dow Jones Industrial Average's 2005 advance, as speculation increased that profits and economic growth will slow next year.

A fourth-quarter rally sputtered this week as bond yields and home resales suggested a weakening economy. The Standard & Poor's 500 Index trimmed its advance for the year, notching its worst performance since the end of the bear market in 2002.

"To buy stocks just because it's the end of the year is not a good reason to do it when the fundamentals indicate otherwise," said Peter Boockvar, of Miller Tabak & Co. in New York. "The yield curve is flattening in response to the slowing housing market. The implications can't be ignored. That's why we're trading the way we are."

Energy-related companies including Halliburton Co. had the only gain among 10 groups in the S&P 500 yesterday as oil prices passed $61 a barrel. Google Inc. and Humana Inc., two of the best-performing stocks this year, fell.

The Dow average fell 67.32, or 0.6 percent, to 10,717.50. The S&P 500 lost 6.13, or 0.5 percent, to 1,248.29. The Nasdaq fell 12.84, or 0.6 percent, to 2,205.32.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where final consolidated volume came to 1.56 billion shares, compared with 1.44 billion shares traded on Thursday.

The Dow fell 0.6 percent for the year, marking its worst annual performance since 2002. The S&P 500, up 5 percent this year at its high reached Dec. 14, gained 3 percent, a third of its 2004 gain. The Nasdaq recorded a 1.4 percent increase.

A 0.1 percent slide this month cut the S&P 500's fourth- quarter gain to 1.6 percent. It's the first December retreat for the index since 2002.

The market is bucking a historical trend with a drop of 1.6 percent in the S&P 500 this week. Since 1969, the index averaged a 1.6 percent advance during the last five trading days of the year and the first two in January, according to the Stock Trader's Almanac.

"The Santa Claus rally hasn't happened yet, and by now investors are fearing that it won't," said Neil Massa, a trader at John Hancock Advisers Inc. in Boston.

Economic growth is expected to slow to 3.4 percent next year from 3.6 percent, based on an estimate of economists surveyed by Bloomberg. S&P 500 profit growth will ease to 12.5 percent next year from 14.5 percent, says a Bloomberg analysis.

For 2006, Wall Street strategists on average forecast that the S&P 500 will rise 7 percent — the third straight annual percentage gain of less than 10 percent.

Next year "will be a good, not great, year," said James Fisher, of Univest Corp. in Souderton, Pa. "It will be a stock-pickers market again, with good and bad sectors and companies." He expects energy, technology and health-care stocks to be the top performers.

For the third time this week, an inversion of the yield curve weighed on stocks. Short-term yields on the two-year Treasury note were at 4.40 percent, more than the yield of 4.39 percent on the 10-year note. The inversion has come before each of the last four recessions. Before this week, it last occurred in 2000.