Stocks wavered on Tuesday, the first trading day of 2023, after a tumultuous year of high inflation and interest-rate increases upended financial markets.

The S&P 500 fell slightly in early trading, giving up initial gains. On this day last year, the S&P 500 hit its record high. Since that peak, the benchmark index fell nearly 20 percent, its worst year since the 2008 financial crisis.

The Federal Reserve’s commitment to fighting high inflation has moved the market over the past year. On Wednesday, the release of the minutes from the Fed’s December meeting, when the central bank shifted to a half-point rate increase after four consecutive three-quarter-point increases, might offer more insight into the path Fed officials are taking to fight inflation. This Friday, the latest monthly data on jobs will be watched for signs that the labor market is slowing down, which would reduce pressure on prices.

Ben Laidler, an analyst at eToro, a trading company, called inflation the “fundamental key” to market moves this year. “A sharp fall opens up relief from the Fed interest rate shock and slow-building economic recession and supports our positive view,” he wrote in a note.

The S&P 500 has recorded an annual drop of 10 percent or more on nine occasions in the past 75 years, and the market rose strongly in seven of the subsequent years, gaining 18 percent on average, according to Mr. Laidler. Most strategists expect the market to end 2023 roughly where it began, after predictions for 2022 proved far too optimistic.

“Anything which limits the aggressiveness of global central banks from here” would be positive for markets, noted Ian Lyngen of BMO Capital Markets, such as lower-than-expected German inflation numbers released on Tuesday.

U.S. Treasury yields fell, but the two-year yield remains well above the 10-year, a rare but reliable sign of recession. The price of West Texas Intermediate crude oil, the U.S. benchmark, fell nearly 1 percent to less than $80 a barrel.

Isabella Simonetti

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