Stocks mixed after Yellen; Nasdaq ends 8-week win streak

U.S. stocks slumped Friday and turned mixed after Federal Reserve Chair Janet Yellen signaled the possibility of an interest-rate increase later this year.

The Dow Jones industrial average rose more than 100 points at one point, but soon relinquished those games. The Dow ended the day down 0.3%, the Standard & Poor's 500 index was off 0.2% and the Nasdaq composite index was up 0.1%.

But the Nasdaq — down for the week and still within 1% of its record closing high — snapped an eight-week winning streak.

Investors are parsing Yellen's every word for clues on interest-rate policy at her speech at a conference in Jackson Hole, Wyo., where central bankers are gathered to discuss the economy.

Yellen said that the case for an interest-rate hike “has strengthened in recent months."

Yellen: Case for rate hike 'has strengthened'

The market's tepid reaction suggests that investors may have priced in the likelihood of an interest-rate increase, though few expect it to occur at the Fed's September meeting. December is more likely.

“While Chair Yellen acknowledged a strengthening economy and that rates could, accordingly, move higher over coming months, the market's reaction is that a rate hike is not going to be forthcoming in September,” Prudential Financial market strategist Quincy Krosby said in an email.

The markets were satisfied by the lack of surprises in Yellen's remarks, said Tim Dreiling, regional investment director of U.S. Bank's Private Client Reserve.

"It was completely in line with most expectations," Drilling said in an interview. "The takeaway is nothing's changed."

David Donabedian, chief financial officer of Atlantic Trust Private Wealth Management, said in a note that the market’s initially positive reaction may have been attributable to “her relaxed view on inflation,” which suggested “a very slow path toward higher rates.”

Yellen said the Fed anticipates "inflation rising to 2 percent over the next few years."

Heading into the speech, investors estimated a 24% chance that the Fed would raise rates in September and a 54% chance that the Fed would hike rates in December, according to CME Group's FedWatch.

"Our expectation is September is probably still off the table but most likely the next increase in December," Drilling said.

Meanwhile, the Commerce Department reported Friday that U.S. gross domestic product rose 1.1% in the second quarter, below a previous estimate of 1.2%. The global economic slowdown and oil's slide have undermined economic activity, but strong employment figures largely have off set those concerns.

Crude oil prices increased as Yellen's speech began. The price of West Texas Intermediate oil, the U.S. benchmark, was up 20 cents to $47.53, while the price of Brent crude, the global benchmark, increased 5 cents to $49.72.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.