By Mark DeCambre and Wallace Witkowski, MarketWatch

Nasdaq finishes higher, but snaps eight-week winning streak

The Dow Jones Industrial Average and the S&P 500 index finished 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.

The Dow Jones Industrial Average fell 53.01 points, or 0.3%, to finish at 18,395.40, backing off an earlier 124-point gain, but paring a 113-point loss. Shares of Verizon Communications Inc.(VZ) and McDonald's Corp. (MCD) led blue-chip decliners.

For the week, the Dow finished down 0.9%, for a second week in a row.

The S&P 500 index fell 3.43 points, or 0.2%, to close at 2,169.04, after trading up as many as 16 points earlier and bouncing back from a 12-point deficit.

Seven of the 10 index sectors finished in the red. All 10 had been positive earlier in the session. Telecom and utilities, often seen as bond proxies, led the charge lower, while health-care, tech, and financials finished slightly higher. The index saw a 0.7% decline since last Friday, marking its second straight weekly fall.

The Nasdaq Composite Index rose 6.71 points, or 0.1%, to finish at 5,218.92, after being up about 41 points earlier and down as low as 20 points during the session. The tech-heavy index, however, closed down 0.4% for the week, snapping its eight-week winning streak.

Yellen offered no specific timetable for a rate increase in 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). Wall Street, anticipating a decidedly more hawkish posture from the Fed boss, temporarily sent shares higher after an 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.

Stocks, however, dropped to session lows after Fischer said in an interview with CNBC that Yellen's remarks were consistent with the possibility of two rate increases in 2016 (http://www.marketwatch.com/story/feds-fischer-yellens-speech-consistent-with-possibility-of-2-interest-rate-hikes-this-year-2016-08-26), suggesting a September rate increase was very much in play.

Stocks have benefited from 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 increases 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 increases 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."

Quincy Krosby, market strategist at Prudential Financial, said Yellen acknowledged "that growth has strengthened but "was careful not to commit to a specific timeline." Krosby 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 at 24%, up from 21% on Thursday, according to the CME Group's FedWatch tool (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html). The market sees the likelihood of a rate increase in December at 58%, up from 52% the day prior.

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, stocks finished slightly lower 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) shed 2.3% 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) finished down 10%, 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) dropped 6.1%, and videogame retailer (http://www.marketwatch.com/story/gamestop-shares-slide-after-revenue-falls-short-of-street-view-2016-08-25)GameStop Corp.(GME) closed down nearly 11% after each company's stock suffered an earnings-driven drop late Thursday.

Autodesk Inc.(ADSK) shares rallied 8.1% 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) settled up 0.7% at $47.64 a barrel, but suffered their first weekly loss in a month (http://www.marketwatch.com/story/oil-prices-retreat-ahead-of-yellens-speech-2016-08-26). European stocks also tilted up after oil turned positive, 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 27, 2016 09:42 ET (13:42 GMT)

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