By Mark DeCambre and Victor Reklaitis, MarketWatch

Yellen sees the case for a rate increase strengthening

U.S. stocks pivoted firmly lower Friday after comments from Fed Vice Chairman Stanley Fischer doubled down on comments from Federal Reserve Chairwoman Janet Yellen that the case for a rate hike is gathering steam.

Yellen didn't provide any specific timetable for a rate increase of key interest rates during a speech at an economics retreat in Jackson Hole, Wyo (http://www.marketwatch.com/story/feds-yellen-says-case-for-another-interest-rate-hike-has-strenghtened-2016-08-26)., and Wall Street, anticipating a decidedly more hawkish posture from the Fed boss, sent shares higher after a brief, initial knee-jerk move lower.

"In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal-funds rate has strengthened in recent months," Yellen said in a speech prepared for delivery to the Jackson Hole summit.

Market participants said the Fed chief's statement offered no new evidence that a rate hike is imminent, which initially bolstered market sentiment, lifting stocks.

Fischer, however, in an interview with CNBC (http://www.cnbc.com/2016/08/26/feds-fischer-economy-has-strengthened-job-report-will-weigh-in-on-hike-decision.html)following Yellen's remarks, said the next jobs report will figure into the decision to raise rates, suggesting a September rate hike was very much in play.

Stocks have enjoyed a protracted period of ultraloose monetary policy.

"Janet Yellen's remarks were consistent with what the Fed has been saying all year--they'd like to raise rates, but are going to be cautious in order to do so in a slow, data-dependent manner," said Chris Zaccarelli, chief investment officer at Cornerstone Financial Partners.

The Dow Jones Industrial Average fell 63 points, or 0.4%, to 18,384, backing off an earlier 124-point gain. Shares of Verizon Communications Inc.(VZ) and Nike Inc.(NKE) led blue-chip decliners.

The S&P 500 index fell 5 points, or 0.2%, at 2,167, after trading up as many as 16 points earlier. All 10 of the large-cap's sectors swung firmly into the red, after all 10 had been positive earlier in the session. Telecom and utilities, often seen as bond proxies, led the charge lower.

The Nasdaq Composite Index shed 6 points, or 0.1%, to 5,206, after being up about 41 points earlier in the session.

Quincy Krosby, market strategist at Prudential Financial said that Yellen acknowledged "that growth has strengthened but "was careful not to commit to a specific timeline." She said that she wouldn't rule out a rate hike in 2016, however.

Wall Street sees the chance of rate increase at the Fed's Sept. 20-21 meeting is 24%, up from 21% on Thursday, according to the CME Group's FedWatch too (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html)l. The market sees the likelihood of a rate increase in December at 58% from 52% the day prior.

"I see nothing in this speech that would motivate me to believe the Fed moves in September," said Jamie Cox, managing partner of Harris Financial Group. "Chair Yellen maintained her position of gradual increases of the Fed-funds rate," he said.

Ahead of the talk, a second estimate of second-quarter gross domestic product did little to boost stocks, underscoring that the U.S. economy is still muddling along, growing at a lackluster 1.1% pace--slower than preliminary reading of 1.2% (http://www.marketwatch.com/story/second-quarter-gdp-rises-just-12-well-below-forecast-2016-07-29) as corporate profits fell.

Meanwhile, Cleveland Fed President Loretta Mester on Friday on CNBC echoed the recent hawkish sentiments of other Fed members, saying "it makes sense" to start moving interest rates higher.

Read more:Yellen to say 'ready' for another rate increase in Jackson Hole (http://www.marketwatch.com/story/yellen-to-say-ready-for-another-rate-hike-in-jackson-hole-2016-08-19)

And see:Fed might raise interest rates despite market objections (http://www.marketwatch.com/story/fed-going-out-to-jackson-hole-to-get-divorce-from-markets-2016-08-23)

On Thursday, the S&P 500 index closed 0.1% lower, while the Dow shed 0.2%, and the Nasdaq Composite Index was down 5.49 points, or 0.1%, to 5,212.20, as investors seemed reluctant to make big bets (http://www.marketwatch.com/story/wall-street-set-for-losses-as-yellen-speech-draws-closer-2016-08-25) on the eve of the Fed chairwoman's speech. The S&P is down 0.5% for the week, as of Thursday's close, and the Dow is 0.6% lower. The tech-heavy Nasdaq is on track to snap an eight week win streak, down 0.5% on the week.

Individual movers: Shares in Herbalife Ltd.(HLF) tumbled nearly 6% following news that billionaire investor Carl Icahn has recently discussed selling his stake (http://www.marketwatch.com/story/carl-icahn-considered-selling-herbalife-stake-to-arch-nemesis-bill-ackman-2016-08-26) in the nutritional-products company to a group including Herbalife's arch-nemesis Bill Ackman.

Anheuser-Busch InBev NV(ABI.BT)(ABI.BT) warned Friday its beer megamerger with SABMiller PLC(SAB.JO) could lead to thousands of job losses (http://www.marketwatch.com/story/ab-inbev-warns-3-to-be-laid-off-in-merger-2016-08-26) in the coming years.

Software company (http://www.marketwatch.com/story/splunk-beats-expectations-and-raises-forecast-but-stock-still-slumps-2016-08-25)Splunk Inc.(SPLK), beauty products seller (http://www.marketwatch.com/story/ulta-shares-weaken-as-outlook-offsets-earnings-beat-2016-08-25)Ulta Salon Cosmetics & Fragrance Inc.(ULTA) and videogame retailer (http://www.marketwatch.com/story/gamestop-shares-slide-after-revenue-falls-short-of-street-view-2016-08-25)GameStop Corp.(GME) all look on track for down days after each company's stock suffered an earnings-driven drop late Thursday.

Other markets: Oil futures pivoted higher in early Friday trade, European stocks also tilted up after oil turned positive after trading lower for much of the morning, while Asia closed mixed.

Other economic reports: Meanwhile, the trade gap narrowed (http://www.marketwatch.com/story/us-trade-gap-narrows-in-july-advance-report-shows-2016-08-26)to a seasonally adjusted $59.3 billion in July from $64.5 billion in June, the Commerce Department said Friday.

And a The University of Michigan's final August reading of consumer sentiment (http://www.marketwatch.com/story/consumer-sentiment-dips-as-americans-divide-on-election-impact-on-economy-2016-08-26)slipped to 89.8 from 90.0 in July. The index is 2.3% lower than a year ago. Economists surveyed by MarketWatch had forecast a reading of 91.0.

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(END) Dow Jones Newswires

August 26, 2016 12:25 ET (16:25 GMT)

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