December 31, 2018 / 5:17 PM / 6 months ago

US STOCKS-Wall Street falters after strong start to wrap up a rocky 2018

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* Indexes up: Dow 0.57 pct, S&P 0.25 pct, Nasdaq 0.27 pct

* Trump says "big progress" on possible China trade deal

* Industrials give up gains, while defensive sectors dip

* Energy, worst S&P sector this year, flat as oil drops

* Dow, S&P, Nasdaq set for biggest one-year drop since 2008 (Adds comments, updates prices)

By Shreyashi Sanyal

Dec 31 (Reuters) - U.S. stock indexes faltered after a strong start on Monday in thin trading, as optimism on signs of progress in the U.S.-China trade war was offset by oil prices erasing gains in the last day of what is Wall Street's worst year in a decade.

President Donald Trump said he had a "very good call" with China's President Xi Jinping on Saturday to discuss trade and that "big progress" was being made, although Chinese state media were more reserved, saying Xi hoped the negotiating teams could meet each other half way.

Trump, as in the past when speaking on trade negotiations, gave no details on what issues were discussed. Trade experts and people familiar with the negotiations have said Beijing needs to do far more to meet U.S. demands for long-term change in how China does business.

"The fact of the matter is that there were Trump headlines over the weekend which pushed stocks higher initially, but such moves certainly don't last for very long in a market like this," said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee. "News on just trade right now is hardly enough to sustain a rally, it just hasn't been the case for a while."

After the violent swings this month, the last day of trading is expected to be relatively muted in comparatively light volumes ahead of the holiday on Tuesday for New Year's Day.

The S&P energy index, the worst performing among the 11 major sectors this year, erased earlier gains to trade flat as oil prices dropped.

Facebook Inc fell 1.2 percent, cementing its place as the worst performing FAANG stock of the year, while Alphabet Inc fell 0.5 percent.

While they weighed the most on the major indexes, the others in the group, Apple Inc, Amazon.com Inc and Netflix Inc, which rose between 0.8 percent and 2.7 percent, provided the biggest boost.

The trade-sensitive S&P industrials sector also gave up gains to trade flat, although Boeing Co's roughly 1 percent gain gave the biggest boost to the Dow Industrials.

At 11:52 a.m. ET, the Dow Jones Industrial Average was up 130.67 points, or 0.57 percent, at 23,193.07, while the S&P 500 was up 6.13 points, or 0.25 percent, at 2,491.87. The Nasdaq Composite was up 17.62 points, or 0.27 percent, at 6,602.15.

Health stocks, already the best performing sector this year, were the biggest gainers, up 0.84 percent. The defensive utilities and real estate were among the eight sectors lower.

The S&P is down roughly 9.5 percent so far in December, on pace for its biggest monthly drop since February 2009 and its worst December since the Great Depression.

The S&P and Dow are down 6.5 percent and 7 percent, respectively, for the year, snapping two-year winning streaks in their biggest annual loss since 2008. The Nasdaq has ended a six-year winning streak to drop about 4.5 percent.

Most of the damage was inflicted in the past three months as worries about Sino-U.S. trade frictions, U.S. interest rate hikes, slowing corporate profit growth, Brexit and the partial U.S. federal government shutdown, now in its 10th day, formed a perfect storm across global financial markets.

Many of these concerns will carry over into 2019, but for this week the major point of interest will be key U.S. economic reports, including on manufacturing and employment.

Declining issues outnumbered advancers for a 1.09-to-1 ratio on the NYSE and a 1.25-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs or lows, while the Nasdaq recorded three new highs and 52 new lows. (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila)

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