Our Focus Turns to News That Could Impact Coming Fed Rate Decisions

While equity futures look to shrug off recent disappointing tech earnings, the outlook for the US equity market's open here on Thursday could pivot based on what is learned between 8:15 a.m and 8:31 a.m. ET today. During that rather brief window, the European Central Bank will announce its latest interest rate decision, one that is widely expected to be a 75-basis-point increase. The ECB also will share how it plans to shrink the size of its balance sheet. That news quickly will be followed by the initial third-quarter US GDP print and the third-quarter Personal Consumption Expenditure (PCE) Price Index.

The consensus third-quarter GDP view is for a reading of +2.4%, which would follow a 0.6% decline in the second quarter, while the Atlanta Fed's GDP Now model sees +3.1%. Typically that data would be the day's focal point, but given the latest round of push-pull over the size of potential Federal Reserve interest rate hikes, odds are the third-quarter reading for the PCE Price Index will be picked over even more. The headline PCE Price Index figure is expected to come in at 5.3% versus 9.1% the prior quarter, while the core reading is thought to slow to 4.5% from 4.7% in the second quarter. The hope is for the data to show inflation pressure retreating, which is something that theoretically could get the Fed to slow the size of its rate hikes. Still, readers should acknowledge that hotter-than-expected data will translate into the Fed not easing up on the rate hike pedal.

As we've shared before, whether the December Fed meeting results in a 50-basis-point rate hike or 75-basis-point hike, the fed funds rate still will be significantly higher entering 2023 than at the start of 2022. Given the lag effect of monetary policy on the economy, those who are hinging their bets that a somewhat smaller December rate hike will have a demonstrative impact are likely to be disappointed.

Coming up this morning, we'll share with members our take on quarterly results from Ford Motor (F) that have us keeping our Two rating intact given the slowing impact of higher auto loan rates. We'll look to revisit that in early 2023 as the $7,500 electric vehicle tax credit kicks in.

Also, last night United Rentals (URI) reported September quarter results that easily cleared the consensus earnings forecast of $9.06 a share with EPS of $9.27, while revenue for the quarter of $3.05 billion essentially matched the consensus forecast. United Rentals will host a conference call at 11 a.m. ET to discuss the quarter and give more insight to its guidance. And this morning we're waiting on quarterly results from Mastercard (MA) , with more to come on that company once we have the earnings release in hand and have digested the earnings conference call.

At the time of publication, Action Alerts PLUS was long F, MA and URI.