By Mark DeCambre and Barbara Kollmeyer, MarketWatch

10-year yield continues to ease; dollar climbs

U.S. stocks climbed Friday as U.S. benchmarks looked set to end an up-and-down stretch of trade on a high note, amid consternation about rising bond yields and the reemergence of long-stagnant inflation.

A Federal Reserve monetary policy report (http://www.marketwatch.com/story/fed-on-track-for-3-rate-hikes-in-2018-but-4-no-sign-in-report-to-congress-2018-02-23), however, offered little sign that the central bank was overly concerned about the type of out-of-control inflation that might warrant more than three rate increases in 2018.

What are the main benchmarks doing?

Dow Jones Industrial Average rose 141 points, or 0.6%, to 25,104, benefiting from sharp gains in components Goldman Sachs Group Inc. (GS) and McDonald's Corp. (MCD). The S&P 500 index added 19 points, or 0.7%, to 2,723, supported by gains of at least 1% in the energy and technology sectors. The tech-laden Nasdaq Composite Index , meanwhile, rose 53 points, or 0.7%, to 7,263.

On Thursday, the Dow advanced 164.70 points, or 0.7%, to 24,962.48. The S&P 500 edged up 0.1% to 2,703.96, but the Nasdaq Composite Index fell 0.1% to 7,210.09. That marked a fourth straight losing session (http://www.marketwatch.com/story/the-nasdaq-just-logged-its-longest-losing-skid-in-more-than-a-year-2018-02-22) for the tech-heavy index, its longest losing skid since a nine-session slide ended Nov. 4, 2016, according to WSJ Market Data Group.

As of Thursday's close, the Dow and S&P 500 were each facing a loss of less than 1% for the week, while the Nasdaq Composite was on track to gain 0.2%, despite its lengthy skid in negative territory.

Read:This doggy Dow stock can teach you smart value investing tricks (http://www.marketwatch.com/story/how-ges-stumble-can-teach-you-to-be-a-smart-value-stock-investor-2018-02-22)

What could drive markets?

In its semiannual monetary policy report, the Fed signaled that it saw broad improvement in the U.S. economy and pointed to a pickup in inflation toward the end of last year, but didn't suggest that a rise in prices warranted more aggressive policy action (http://www.marketwatch.com/story/fed-on-track-for-3-rate-hikes-in-2018-but-4-no-sign-in-report-to-congress-2018-02-23).

Indeed, the Fed stuck to its forecast for inflation to hover at or below its 2% target in 2018. The 12-month rate of inflation based on the Fed's preferred PCE index stood at 1.7% in December.

The Fed's summary comes ahead of newly minted Fed Chairman Jerome Powell's testimony about the economy before Congress next week.

Powell's testimony arrives ahead of the Fed's key monetary-policy convention next month, but after a release of minutes for January on Wednesday rattled investors, already fretting about inflation and bond yields drifting higher.

Wednesday's minutes (https://www.federalreserve.gov/monetarypolicy/fomcminutes20180131.htm) sparked a downdraft in equities as the yield of the 10-year Treasury note hit a fresh four-year high above 2.956%, undercutting appetite for assets perceived as risky like stocks. Most recently, the 10-year Treasury note was down about basis points at 2.88%.

On Thursday, bond yields moderated after St. Louis Fed President James Bullard cast doubt on the likelihood of four rate rises this year (http://www.marketwatch.com/story/feds-bullard-casts-doubt-on-expectations-of-four-interest-rate-hikes-this-year-2018-02-22), dampening expectations of a faster pace of action.

Read:Here's why stock-market investors need to keep an eye on the yield curve (http://www.marketwatch.com/story/heres-why-stock-market-investors-need-to-keep-an-eye-on-the-yield-curve-2018-02-22)

Separately, comments from Treasury Secretary Steven Mnuchin were drawing attention. In an interview with Bloomberg (http://www.marketwatch.com/story/mnuchin-says-us-wages-can-rise-without-boosting-inflation-2018-02-23), Mnuchin brushed aside concerns over rising wages, saying these didn't necessarily have to trigger a rise in overall inflation. The Fed policy report appeared to echo that view.

Opinion:3 reasons stock-market investors should think it really is different this time (http://www.marketwatch.com/story/3-reasons-stock-market-investors-should-think-it-really-is-different-this-time-2018-02-22)

What are strategists saying

Doug Cote, chief market strategist at Voya Investment Management, said strong corporate earnings, healthy readings of manufacturing justify an upbeat outlook for stocks and bond yields rising off ultralow levels.

With that economic growth interest rates are rising and that is a good thing. There is no way the economy can be growing at 3%, as it is now, without the 10 year yield also going up but this is like a high-quality problem," Cote said.

"Because although it will discount equities and create more volatility, it is a sign that secular stagnation, disinflation...are finally in the rearview mirror and now we're in a normal market," he said, referring to a period framed by easy-money policies across much of the globe in the wake of the 2007-09 financial crisis.

"(San Francisco Fed President John Williams) may be the most important of the Fed speakers, because of his influential research on the neutral policy rate and his positioning near the center of the Committee," said Marshall Gittler, chief strategist at ACLS Global.

"Recently, he has been tilting hawkish and so may be indicative of a gradual shift in the center of gravity of the FOMC. That would probably be positive for the dollar," Gittler said.

What stocks are moving?

Shares of Blue Buffalo Pet Products Inc.(BUFF) soared 17% in after General Mills Inc.(GIS) announced an $8 billion buyout of the company (http://www.marketwatch.com/story/general-mills-buying-pet-foods-maker-blue-buffalo-in-8-billion-cash-deal-2018-02-23). Shares of General Mills were off 3.7%.

Hewlett-Packard Enterprises Co.(HPE) shares jumped about 10% after the enterprise-focused tech group reporting a strong fiscal first quarter. Read:HP Enterprise earnings jolt stock, but there isn't much to be excited about (http://www.marketwatch.com/story/hp-enterprise-earnings-jolt-stock-but-there-isnt-much-to-be-excited-about-2018-02-22)

Shares of HP Inc.(HPQ) rose 5.4% after the consumer-focused tech company beat earnings expectations and raised its full-year forecast (http://www.marketwatch.com/story/hp-earnings-beat-raised-forecast-send-stock-higher-2018-02-22).

Shares of Xcerra Corp.(XCRA) could be active after the company that provides testing technology for semiconductors and electronics said it would terminate its sale to a Chinese group (http://www.marketwatch.com/story/xcerra-calls-off-580-million-deal-amid-scrutiny-2018-02-23), saying federal approval was too hard to get for the $580 million deal. The company's shares were down 0.5%.

How are other assets performing?

European stocks were trying to tip higher along with U.S. equities (http://www.marketwatch.com/story/european-stocks-struggle-to-find-impetus-to-follow-us-lead-higher-2018-02-23), while Asian stocks rebounded (http://www.marketwatch.com/story/asian-stocks-slide-following-wall-street-selloff-2018-02-21) to mark a second-straight week of gains.

(http://www.marketwatch.com/story/asian-stocks-slide-following-wall-street-selloff-2018-02-21)Gold prices slipped, extending a recent downtrend (http://www.marketwatch.com/story/gold-on-track-for-biggest-weekly-drop-this-year-2018-02-23), while the dollar , as gauged by the ICE U.S. Dollar Index , rose 0.2% to 89.950. Oil prices turned higher (http://www.marketwatch.com/story/oil-on-track-for-second-consecutive-weekly-rise-2018-02-23).

(END) Dow Jones Newswires

February 23, 2018 11:30 ET (16:30 GMT)