US Stock Futures Rise as Yields Retreat From Highs

U.S. stock index futures rose Friday as Treasury yields took a breather from a week-long rally that was sparked by worries that the Federal Reserve would keep interest rates higher for longer to tame stubborn inflation.

Wall Street indexes have had a volatile start to March after the latest economic data pointed to rising raw material costs and a resilient labor market, while signaling that the U.S. central bank was yet to see the desired impact of its policy tightening measures on inflation.

The U.S. 10-year Treasury yield fell on Friday after touching a four-month high in the previous session but stayed above the 4% level.

“What is driving the optimism despite the new data we received in contrast to January, is investors are still open for the next Fed meeting to come up with a 25 basis point hike,” said Guido Petrelli, chief executive officer of Merlin Investor.

“The volatile market will continue in March until we get consistent data in terms of the economy slowing down but not open up worries of a recession.”

Offering respite to stock markets on Thursday, Atlanta Fed President Raphael Bostic said the impact of higher rates on the economy might only begin to “bite” in earnest this spring, an argument for the Fed to stick with “steady” quarter-point rate increases.

Hawkish comments from Fed policymakers and recent economic data have pushed traders to price in at least three more 25 basis point rate hikes this year and see interest rates peaking at 5.43% by September from the current 4.66%.

The odds of a bigger 50 basis point rate hike in March stood at just 20% but investors are awaiting monthly payrolls and consumer prices data to see if the Fed will go big later this month.

The Institute for Supply Management’s survey, due at 10:00 a.m. ET, is expected to show that a gauge of services sector activity in February eased to 54.5 in February from 55.2 in January.

Central bank officials including Bostic and Fed Dallas President Lorie Logan are scheduled to speak later in the day.

At 7:40 a.m. ET, Dow e-minis were up 82 points, or 0.25%, S&P 500 e-minis were up 13 points, or 0.33%, and Nasdaq 100 e-minis were up 35 points, or 0.29%.

Dell Technologies Inc slipped 2.9% in premarket trading after it forecast current-quarter revenue and profit below Wall Street estimates, hit by an ongoing demand slump in its PC business.

Marvell Technology Inc slid 8.2% after the semiconductor maker provided first-quarter profit and revenue forecasts that fell short of analysts’ estimates.

Hewlett Packard Enterprise rose 2.3% after the laptop maker gave an upbeat full-year earnings forecast.