By Sinéad Carew

NEW YORK (Reuters) - The S&P 500 and the Nasdaq closed lower on Tuesday after the release of U.S. economic data at the start of a holiday-shortened week while bond yields rose after China said it would scrap its COVID-19 quarantine rule for inbound travelers.

U.S. Treasury yields rose as investors tried to assess the path of interest rate hikes from the Federal Reserve and eyed China's scaling back of restrictions. While China's changes were seen as a potential economic boost, money managers were cautious about reports of increasing infection rates there.

Meanwhile, U.S. economic releases showed that the advance goods trade deficit for November narrowed to $83.35 billion from the prior month's $98.8 billion, while a separate report pointed to continued struggles for the housing market as home prices fell under rising mortgage rates.

Oil futures, after hitting a three-week high earlier in the day, were a mixed bag at settlement with restarts at some U.S. energy plants shut by winter storms offseting hopes for a recovery in demand after China's latest easing restrictions.

The rise in Treasury yields put pressure on growth stocks including the rate-sensitive technology sector, according to Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.

"It's a lack of anybody with the conviction to step in and buy right now," said O'Rourke.

The strategist also cited the weight of a sharp pullback for electric car maker Tesla Inc, which fell 11.4% on Tuesday for its lowest close since August 2020. Reuters reported Tesla plans a reduced production schedule in Shanghai in January, extending output reductions it began this month.

Gene Goldman, chief investment officer at Cetera Investment Management, described Tuesday's session as "lacklustre" as investors were waiting for next week's Fed meeting minutes and economic data such as the jobs report.

The Dow Jones Industrial Average rose 37.83 points, or 0.11%, to 33,241.76, the S&P 500 lost 15.56 points, or 0.40%, to 3,829.26 and the Nasdaq Composite dropped 144.64 points, or 1.38%, to 10,353.23.

Markets in some regions including London, Dublin, Hong Kong and Australia remained shut after the Christmas holiday.

MSCI's gauge of stocks across the globe shed 0.15% and was down 19.8% year-to-date.

While Cetera's Goldman said China's changing COVID policies would be "good news for the global economy down the road," he noted renewed caution among people in China due to the current uptick in COVID infections since China eased restrictions.