U.S. stocks softened Friday, closing modestly lower on the last trading day of 2023 and capping a robust year-end rally as investors eyed easier monetary policy in the year ahead.

The stock market has seen remarkable upward momentum in the closing months of the year, powering all three major indexes to monthly, quarterly and annual gains.

For the year, all three posted double-digit growth.

"On January of this year, 363 days ago, if I said I think the S&P is going to gain more than 20% in 2023, you would have put me into the slightly nutty category," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. "There’s certainly reason to be pleased this year and there's reason for optimism going into 2024."

"There’s really no reason for today's small sell-off," Pursche added. "There's no news that’s driving it."

"I would ascribe it to last-minute portfolio changes, profit taking as we enter the new year, and perhaps some rebalancing."

Smallcaps came to life in the last months of the year, with the Russell 2000 roaring back from a year-to-date loss of 7.1% as of late October to end the year with a more than 15% annual gain.

The S&P 500 is still drifting within 1% of its record closing high reached on Jan. 3 2022. Closing above that level — 4,796.56 — would confirm the bellwether index entered a bull market when it touched its bear market trough in October 2022.

It was a tumultuous year marked by the U.S. banking crisis in March, an artificial intelligence stocks boom, jitters about Middle East oil supplies stemming from the Israel-Hamas war and fears that restrictive Fed policy could tilt the U.S. economy into recession.

Falling interest rates helped spark a remarkable year-end rally, which shifted into overdrive in December when the Federal Reserve opened the door to U.S. interest rate cuts in 2024 after a rate hike campaign that helped bring inflation down toward the central bank's 2% annual target.

According to preliminary data, the S&P 500 lost 10.19 points, or 0.23%, to end at 4,773.16 points, while the Nasdaq Composite lost 80.71 points, or 0.53%, to 15,014.43. The Dow Jones Industrial Average fell 13.15 points, or 0.03%, to 37,696.95.

For the year, Nasdaq soared by 43%, the S&P 500 climbed 24% and the Dow rose 14%.

Among 2023's best sectors, technology, communication services , and consumer discretionary were the outperformers among the 11 major S&P 500 sectors, with utilities, energy and consumer staples losing ground.

Among corporate movers, Uber Technologies and Lyft lost ground following a report that Nomura downgraded the ride-sharing platforms.

Markets will be closed on Monday, Jan. 1 for New Year's Day.