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Two U.S. stock market indexes hit 52-week lows on Tuesday, adding to President Joe Biden's economic woes as he contends with a cut in international oil production and the fallout of Russia's ongoing war in Ukraine.
Both the Standard & Poor's 500 Index, or S&P 500, and the Nasdaq Composite Index recorded 52-week lows, according to CNBC's trackers. The S&P 500 Index features 500 leading U.S. publicly traded companies and is regarded as one of the best gauges for the overall U.S. stock market, Investopedia explained. The Nasdaq Composite Index is a market capitalization-weighted index that includes more than 3,700 stocks listed on the Nasdaq stock exchange.
The S&P 500 last recorded a 52-week high on January 4, while the Nasdaq Composite recorded a 52-week high on November 22 last year, according to CNBC.
The two dips came as concerns over the U.S. economy remain rampant amid soaring inflation and expert speculation over a potential recession and housing market crash. Stephen Ciccone, chair of the University of New Hampshire's Department of Accounting and Finance, told Newsweek that the 52-week lows were "quite significant."
"The market has already dropped considerably this year, so hitting the 52-week low shows it is continuing to decline. The market is clearly worried about inflation, increasing interest rates, and a recession," Ciccone said. "Inflation, higher interest rates, and recessions are very much related. Inflation is often curbed by higher interest rates. However, the higher rates can lead to recessions as the higher borrowing costs slow economic activity and growth."
The S&P 500 not only hit a 52-week low on Tuesday but also dropped to its lowest level since November 2020, CNBC reported. Ciccone said that the primary factor playing into both 52-week lows is interest rates, which the Federal Reserve has hiked up several times in recent months in an attempt to combat inflation.
"This change in Fed policy to higher rates has shaken the markets. Interest rate increases are bad for stocks and also bad for bonds," Ciccone said. "For example, stocks will need to borrow at higher rates to fund their projects, thus making the projects less profitable or even unprofitable. Increased interest rates are usually associated with recession fears, and the current market situation is no exception."
Ciccone added that another factor contributing to the lows is the "strong dollar," which he said, "is a hindrance to economic activity as U.S. exports become more expensive abroad."
"This has a large impact on companies with a substantial proportion of foreign sales, which are the vast majority of large-cap stocks," he said.
America's economic issues seem to be coming both from home and abroad. The ramifications of Russia's war in Ukraine have been felt around the world as countries critical of the conflict have started to distance themselves from business dealings with Russia and have faced supply chain disruptions.
After Russia invaded Ukraine on February 24, the U.S. moved quickly to ban Russian oil imports and impose other economic sanctions alongside Western allies in an attempt to isolate the country economically. A subsequent period of elevated gas prices in the U.S. reached a peak on June 14, when the national average price for a gallon of regular unleaded gasoline was $5.016, according to AAA.
Average gas prices then saw gradual improvements for a period of time, hitting $3.718 one month ago, but have since started to slowly tick up again. On Tuesday, AAA showed that the national average was $3.923.
Amid this price uptick, the Organization of Petroleum Exporting Countries (OPEC) decided to cut oil production by 2 million barrels a day last week, a move that national security adviser Jake Sullivan and National Economic Council Director Brian Deese said in a joint statement had "disappointed" Biden as "the global economy is dealing with the continued negative impact of Putin's invasion of Ukraine."
One expert told Newsweek last week that the OPEC decision could cause further woes for the U.S. economy by driving up gas prices, which could worsen inflation and put the U.S. at risk of a "prolonged recession."
The joint statement from Sullivan and Deese said that Biden had directed the Energy Department to release another 10 million barrels from the Strategic Petroleum Reserve next month, continuing earlier releases that the president ordered in March.
"In light of today's action, the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC's control over energy prices," the statement said.
Newsweek reached out to the White House for comment.
Updated 10/11/2022, 5:10 p.m. ET: This story has been updated with comments from Stephen Ciccone.
About the writer
Zoe Strozewski is a Newsweek reporter based in New Jersey. Her focus is reporting on U.S. and global politics. Zoe ... Read more