Expect stocks to struggle with rising prices, says David Rosenberg

U.S. stock futures rose on Friday as investors pondered the Federal Reserve’s rate hike path in light of fresh comments from central bank speakers.

Nasdaq 100 futures rose 0.3% and S&P 500 futures rose 0.2%. Dow Jones Industrial Average futures rose 33 points.

These moves come as US Treasury yields retreated. The benchmark 10-year yield fell more than 6 basis points to 4%. The 2-year interest rate fell to 4.855%.

The major averages are heading for a positive week. The S&P 500 is up 0.28%, snapping a three-week decline, while the Nasdaq is up 0.6%. The Dow is also up 0.6% for the week.

The Dow Thursday had its best day since February 13, closing 1.1% higher. The S&P 500 rose by 0.8% and Nasdaq Composite climbed 0.7%. Those gains came after Atlanta Fed President Raphael Bostic said he believes the central bank can keep its interest rate hikes to 25 basis points rather than the half-point increase favored by some other officials.

However, Fed Governor Christopher J. Waller struck a tougher tone in his remarks to the Mid-Size Bank Coalition of America, raising the possibility that a higher terminal price if inflation figures do not cool down.

He cited January’s big payrolls report, which showed the economy added 517,000 jobs, as well as the latest reading from the consumer price index and personal consumption expenditure reports.

“If these data reports continue to come in too hot, the policy target range will need to be raised even more this year to ensure we don’t lose the momentum that was in place before the January data was released,” Waller said.

The road ahead is tough for the central bank, regardless of the messages they convey to the public.

“No matter how slow the Fed moves, no matter how much they ‘communicate’ what they want to do, there is no avoiding the pitfall of reversing extraordinary easing,” Bleakley chief investment officer Peter Boockvar wrote in a note.

“When markets and the economy have been dependent and medicated for so long on low interest rates and QE, there will never be the right time to ease,” he said.

On the economic data front, the Institute of Supply Management will release its Non-Manufacturing Purchasing Managers’ Index (PMI) report on Friday morning. Investors will also be listening for additional comments from central bank officials, including Fed Governor Michelle Bowman and Richmond Fed President Thomas Barkin.