The S&P 500 closed lower on Monday, having clawed its way back from steep losses early in the session as investors juggled the outbreak of an ominous new strain of COVID-19 with the passage of a long-anticipated stimulus package.

The Nasdaq dipped slightly to join the S&P 500 in the red, but financials helped the blue-chip Dow reverse course for a modest gain.

"The 'Santa rally' will have to wait," said David Carter, chief investment officer at Lenox Wealth Advisors in New York. "Troubling news about COVID in the UK has reminded markets that COVID isn't solved yet; the road ahead may be bumpy and uncertain."

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, small business relief, and vaccine distribution, but the dollar amount fell short of what many had hoped for.

"Fiscal stimulus plan appears big enough to hold off a recession, but not for long," Carter added. "But while it's not as large as many market participants hoped, it does include many meaningful actions that can support markets."

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 lost 1.2%.

Tesla Inc 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 6.5%.

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 jumped 2.7%.

Goldman Sachs Group surged 6.1%, surpassing its pre-COVID share price.

The Dow Jones Industrial Average rose 37.4 points, or 0.12%, to 30,216.45, the S&P 500 lost 14.49 points, or 0.39%, to 3,694.92 and the Nasdaq Composite dropped 13.12 points, or 0.1%, to 12,742.52.

Of the 11 major sectors in the S&P 500, financials and tech were the only percentage gainers.

Nike Inc rose 4.9% after the athletic apparel maker boosted its full-year revenue forecast, prompting multiple brokers to raise their price targets.

Lockheed Martin Corp lost 1.9% after announcing it would buy U.S. rocket engine maker Aerojet Rocketdyne Holdings Inc for $4.4 billion.

International Business Machines Corp shed 2.0% 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 1.85-to-1 ratio; on Nasdaq, a 1.26-to-1 ratio favored decliners.

The S&P 500 posted 16 new 52-week highs and no new lows; the Nasdaq Composite recorded 182 new highs and 17 new lows.

Volume on U.S. exchanges was 11.60 billion shares, compared with the 11.68 billion average over the last 20 trading days.

GLOBAL MARKETS

A gauge of equities around the world fell on Monday and oil prices plunged as concerns about a new coronavirus strain in Britain overshadowed optimism over a vaccine-fueled rebound in economic growth.

The dollar index, which had risen earlier in the session as investors sought refuge in the greenback, gave up its gains and was last 0.17% lower.

"The initial sell-off was a knee-jerk reaction to the news we saw in the UK," said Keith Lerner, chief market strategist at Truist Advisory Services in Atlanta. "As the day goes on, people are starting to sift through what's in the fiscal package. In our view, it's underappreciated."

Still, MSCI's gauge of stocks across the globe declined 0.81%.

The new coronavirus strain, said to be up to 70% more transmissible than the original, has put some 16 million Britons under tougher lockdowns and prompted several countries to shut their borders to the UK.

Worries over the new strain sent European stocks plunging. The pan-European STOXX index ended 2.3% lower.

In both Europe and the United States, travel and leisure stocks, which had been expected to be among the biggest beneficiaries of an economic reopening, fell.

The British pound also tumbled on virus concerns, as well as the lack of a post-Brexit trade deal ahead of a Dec. 31 deadline. It was last down 0.45% at $1.3462.

The euro traded lower, too, down 0.17% to $1.2234.

Meanwhile, commodities that had been expected to benefit from a growth upswing next year plunged.

Both Brent and U.S. crude dropped more than 2% while copper fell off the $8,000-per-tonne mark it recently scaled for the first time since 2013.

Even so, Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management, said he expected vaccine rollouts would limit broad market downside.

"A correction is justified but a very strong sell-off would surprise us... because of the vaccine, by next March-April, we should be able to think about normalization again," he said.

Volatility in U.S. equities jumped as the indexes swooned. Though it finished well off its session high, the Cboe Volatility Index, known as Wall Street's "fear gauge," notched its largest one-day gain since late October.

Safe-haven assets such as German and U.S. government bonds also rose early on Monday, though Treasury yields, which move inversely to prices, later pared losses.

Benchmark 10-year Treasury notes last rose 3/32 in price to yield 0.9396%.

However, gold, which usually rises during times of turmoil, fell on Monday. It last 0.3% to $1,876.09 an ounce after dropping as much as 1.3% earlier in the session.