By Mark DeCambre and Wallace Witkowski, MarketWatch

Yellen, Fischer comments strengthen rate-hike likelihood

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

Yellen didn't provide any specific timetable for a rate increase during a speech at the Kansas City Fed's annual 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 increase 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 increase was very much in play.

Stocks have enjoyed a protracted period of ultraloose monetary policy. The Fed has been on hold since delivering its first rate rise in nearly a decade in December.

"I think Stanley Fischer is trying to keep the market honest and his comments regarding September being on the table and two rate hikes still a possibility are a great example of what is 'technically true' versus what is a likely outcome," said Chris Zaccarelli, chief investment officer at Cornerstone Financial Partners.

"If I'm Vice Chair Fischer, I'd rather predict two rate hikes and have the market price in one hike, rather than predict one rate hike and have the market predict zero," Zaccarelli said. "In this way, the market will be prepared for a rate hike in December."

The Dow Jones Industrial Average fell 75 points, or 0.4%, to 18,374, backing off an earlier 124-point gain. Shares of Verizon Communications Inc.(VZ) and McDonald's Corp. (MCD) led blue-chip decliners.

The S&P 500 index fell 7 points, or 0.3%, at 2,166, after trading up as many as 16 points earlier. All 10 of the large-cap's sectors were firmly in 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 12 points, or 0.2%, to 5,200, after being up about 41 points earlier in the session. The tech-heavy index is on track for snapping its eight-week winning streak with a 0.7% decline.

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 increase 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 speech, 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.

Individual movers: Shares in Herbalife Ltd.(HLF) tumbled 4% 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 traded lower after each company's stock suffered an earnings-driven drop late Thursday.

Autodesk Inc.(ADSK) shares rallied 8% after the company topped Street targets (http://www.marketwatch.com/story/autodesk-raises-annual-outlook-after-results-2016-08-25) and raised its outlook.

Other markets:Oil futures (http://www.marketwatch.com/story/oil-prices-retreat-ahead-of-yellens-speech-2016-08-26) ticked higher in Friday trade, European stocks also tilted up after oil turned positive after trading lower for much of the morning, while Asia closed mixed. Gold futures (http://www.marketwatch.com/story/gold-rises-as-yellen-looms-but-on-track-for-weekly-loss-2016-08-26) settled up 0.1% at $1,325.90 an ounce, while the U.S. Dollar Index rose 0.6% to 95.37.

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.

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.

Check out:

--Victor Reklaitis in London contributed to this report.

(END) Dow Jones Newswires

August 26, 2016 14:23 ET (18:23 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.