US open: Market struggles for direction in wake of Yellen's comments and bulk of economic data

Just after 15:00 BST, the Dow Jones Industrial Average was down 17 points to 18,036.41, while the S&P 500 and the Nasdaq lost two and gained three points respectively.

Yellen speech

An increase in short-term interest rates is likely at some point this year, Yellen told congressmen on Wednesday afternoon.

Yellen said the prospects for “further improvement” in the US labour market and economy more broadly were favourable. However, some market gauges indicate “there is still some slack in labour markets”.

“Although there are tentative signs that wage growth has picked up, it continues to be relatively subdued, consistent with other indications of slack,” she said.

Yellen's message was met with a lukewarm reception, with analysts indicating that the Fed chairwoman's testimony provided little new insight into her latest thinking.

"Regardless of her current assessment of economic conditions, what will determine the timing of the first rate hike and the pace of tightening after that is economic conditions, particularly the pace of wage growth and core inflation," said Paul Ashworth, chief US economist at Capital Economics.

"We still believe that a pick-up in both will prompt the Fed into a much more aggressive series of rate hikes next year."

A weak reading on June retail sales out on Tuesday sparked speculation the Fed may delay its first rate hike, which pushed the main stock averages higher for a fourth straight day.

Wednesday data

Manufacturing activity in the US picked up slightly in July, a leading indicator for activity in the sector showed.

The Federal Reserve bank of New York’s manufacturing sector gauge rose to 3.9 for July from -2 in the previous month, exceeding expectations of a 3.3 reading.

Meanwhile, US factory gate prices increased by 0.4% month-on-month in June, ahead of consensus forecasts of a 0.2% rise.

"We expect PPI inflation to continue to rise, as the significant drag from the energy component is likely behind us and we expect the impact of the dollar appreciation on domestic inflation to largely dissipate by the second half of this year," Barclays analysts said in a note.

According to the Federal Reserve, industrial output grew 0.3% month-on-month in June, compared with analysts’ expectations of a 0.1% increase, while capacity utilisation rose to 78.4% last month from an upwardly revised 78.2%, beating expectations of a 78.1% reading.

Earnings in focus

In company news, Bank of America rose 2.28% after its second-quarter earnings and revenue beat expectations.

BlackRock climbed 0.33% after posting better-than-expected second-quarter earnings and revenue.

Biotech group Celgene jumped 8.04% after announcing late on Tuesday that it was in talks to buy Receptos, whose shares surged 10.5%.

Going the other way, Delta Air Lines declined 1.86% despite posting better-than-expected quarterly results.

Netflix and Intel will report after the closing bell.

Elsewhere, European stocks fluctuated as investors waited for Greece’s parliament to vote on the bailout deal, while Asian markets closed on a mixed note, with Chinese stocks ending lower, despite solid economic data.

The dollar climbed 0.41% against the yen, gaining 0.25% against the pound and 0.48% against the euro, while gold futures fell 0.51% to $1,147.60.

Oil prices tumbled, with West Texas Intermediate losing 1.53% to $52.24 a barrel, while Brent dropped 1.63% to $57.57 a barrel.