S&P 500 Circles New 2022 Lows Following Latest Fed Rate Hike: Is A Recession Inevitable?

The SPDR S&P 500 ETF Trust SPY suffered more heavy losses this week in response to another aggressive Federal Reserve interest rate hike, and the S&P 500 index is approaching a retest of its 52-week low of 3,636 back in June as Friday's market close approaches. 

Investors are becoming increasingly concerned the Fed will be unable to get inflation under control without triggering a U.S. recession. The Dow Jones Industrial Average dropped to new 2022 lows in intraday trading, while the S&P 500 finished the week less than 1% away from new lows.

On Wednesday, the Federal Open Market Committee raised its fed funds target range by 0.75% to between 3% and 3.25%.

The move marks the third 0.75% rate hike for the Fed in four months as it continues to battle inflation. In its updated economic projections, the Federal Reserve raised its outlook for 2022 personal consumption index inflation to 5.4%, up from 5.2% in June.

In response to the rate hike, interest rates on two-year and 10-year U.S. Treasury bonds reached their highest levels in more than a decade. Ten-year rates traded at 3.68% on Friday, while two-year Treasury rates hovered around 4.2%.

On Wednesday, DoubleLine Capital CEO and so-called "bond king" Jeff Gundlach told CNBC the Federal Reserve waited too long to raise rates and is now being too aggressive with its policy tightening, putting the health of the U.S. economy at risk. Gundlach said the odds of a U.S. recession in 2023 are now "at 75%."

Ford Motor Company F shares dropped 19% this week after the Michigan automaker warned investors the company would incur an additional $1 billion in inflation and supply chain costs in the third quarter.

Related Link: What In The World Is Going On With Ford Shares?

Half-Baked: Shares of Canadian cannabis company Aurora Cannabis Inc ACB traded lower by 12% on Wednesday morning after the company reported a larger-than-expected $462-million net loss in the fiscal fourth quarter.

In the week ahead, investors will get more quarterly earnings reports from Rite Aid Corporation RAD, Nike Inc NKE, Micron Technology, Inc. MU and Bed Bath & Beyond Inc BBBY on Thursday.

Wall Street analysts currently have the highest percentage of "buy" ratings in the S&P 500 Energy and Information Technology sectors, according to FactSet.

Economic Numbers: In the week ahead, investors will get key economic updates on Tuesday when the Conference Board releases its September U.S. Consumer Confidence reading and on Wednesday when Federal Reserve Chair Jerome Powell speaks at the 2022 Community Banking Research Conference.

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