Stocks, long-term bonds start off year with declines

Stocks gave up an early gain and ended lower Tuesday, a lackluster first trading day of 2023 for Wall Street just days after it closed the books on its worst year since 2008.

The Standard & Poor’s 500 index shed a 1% gain and finished 0.4% lower. The Dow Jones industrial average slipped less than 0.1% and the Nasdaq composite dropped 0.8%. Small-company stocks also lost ground, pulling the Russell 2000 index 0.6% lower.

Technology stocks were among the biggest weights on the market. Apple fell 3.7%, leaving its market value below $2 trillion for the first time since March 8, 2021. Shares in the iPhone maker fell nearly 27% in 2022, their first annual decline in four years amid a broad slide in technology sector stocks.

Long-term bond yields fell significantly. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.77% from 3.88% late Friday. Stock and bond markets were closed Monday for the observed the New Year’s Day holiday.

Investors are starting 2023 with the same concerns that weighed on markets in 2022, leading the benchmark S&P 500 to plunge nearly 20% for the year, just its third annual decline since the financial crisis 14 years ago.

Inf lation is easing, but remains stubbornly hot, which has prompted the Federal Reserve to keep raising interest rates to slow economic growth. That has left Wall Street bracing for a recession and higher unemployment that could result from those policies.

The Fed will release minutes from its December policy meeting Wednesday, potentially giving investors more insight into its decision-making process and thoughts heading into 2023. Its next decision on interest rates is set for Feb. 1.

The Fed’s key lending rate stands at a range of 4.25% to 4.5% after rocketing from a range of 0% to 0.25% at the beginning of 2022. The U.S. central bank forecasts that it will reach a range of 5% to 5.25% by the end of 2023, and it currently doesn’t call for a rate cut before 2024.

Investors also are looking ahead this week to several updates on the employment market, which has been a strong area of the broader economy. That has helped buffer the economy from a recession, analysts have said, but it also makes the Fed’s fight against inflation more difficult and raises that risk that it could go too far and bring on a recession.

The government will release a report Wednesday on job openings for November, followed by a weekly report on unemployment Thursday. The broader and closely watched monthly report on employment, for December, will be released Friday.

“If we get a weak report, that would be a boost to the market because it might imply that the Fed will ease back a bit on the rate hikes,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.

All told, the S&P 500 fell 15.36 points to 3,824.14. The Dow slipped 10.88 points to 33,136.37. The Nasdaq slid 79.50 points to 10,386.98. The Russell 2000 fell 10.51 points to 1,750.73.