Stocks are mostly lower as Ukraine tensions flare
By KEN SWEET, Associated Press
Aug 22, 2014 2:02 PM CDT
FILE - This Aug. 19, 2013 file photo shows the New York Stock Exchange in New York. European stock markets turned lower on Friday, Aug. 22, 2014, while Wall Street was expected to open flat, amid concerns of an escalation in the Ukrainian crisis after a Russian aid convoy entered the country. (AP Photo/Mark...   (Associated Press)

NEW YORK (AP) — Stocks edged mostly lower Friday after a speech by Federal Reserve Chair Janet Yellen left investors unsure about how the nation's most important financial voice feels about raising interest rates in the coming months. Investors were also monitoring another flare-up in tensions between Ukraine and Russia.

KEEPING SCORE: The Dow Jones industrial average lost 38 points, or 0.2 percent, to 17,001 as of 2:48 p.m. Eastern. The Standard & Poor's 500 index fell four points, or 0.2 percent, to 1,988 and the Nasdaq composite was up six points, or 0.1 percent, to 4,538.

UKRAINE: A Russian convoy entered Ukraine, defying the government there. Ukraine called the move a "direct invasion" intended to provoke an international incident. The action drew condemnation from the European Union, the United States and NATO. The trucks are purportedly carrying aid to residents in rebel-held zones where separatists are fighting with the Ukrainian government.

YELLEN SPEECH: Investors also have their eyes turned West to Jackson Hole, Wyoming, where Yellen addressed an annual conference of central bankers and other policymakers from around the globe.

In her speech, which focused on labor markets, Yellen said the Great Recession complicated the Fed's ability to assess the U.S. job market and made it harder to determine when to adjust interest rates. Yellen offered no signal that she's altered her view that the economy still needs support from the Fed in the form of ultra-low interest rates.

"The uncertainty that policymakers feel on numerous fronts was evident in Yellen's speech," John Hoff, a fixed income strategist at RBS, wrote in a note to investors.

The timing of a Fed rate increase remains unclear, however most investors expect the first one to come sometime in 2015. Yellen's speech comes two days after a report from the Fed seemed to show a growing chorus of policymakers wanting to raise interest rates.

"I think this was business as usual for Yellen. She was measured and deliberate and the market had a minimal reaction to it," said Michael Fredericks, portfolio manager of Blackrock's Multi-Asset Income Fund, which has $8.8 billion in assets.

INVESTORS' INTEREST IN INTEREST RATES: The nation's key interest rate, known as the Federal Funds Rate, has been near zero since late 2008 in order to simulate economic activity and demand. The downside to low interest rates is the possibility that the U.S. economy could recover too quickly and heat up, leading to inflation.

The Fed Funds rate helps determine interest rates on a variety of financial products including mortgages, credit cards and the yields that bond pay. Many investors believe the U.S. economy has recovered enough from the depths of the financial crisis to warrant higher interest rates.

The Fed has been winding down another economic stimulus program, large-scale purchases of bonds in the open market, since December.

DRAGHI'S TURN: Later Friday, European Central Bank head Mario Draghi said the bank is ready to do more to boost the shaky recovery in the 18 countries that use the euro. However he also called on European warns governments to join in efforts to reduce unemployment.

ELECTRIFYING: Dynergy rose $2.16, or 7 percent, to $31.88 after the company announced it was buying $6.25 billion in power plants from Duke Energy and Energy Capital Partners. The deal would double Dynergy's power generation capabilities.

MIND THE GAP: Clothing chain Gap jumped $2.00, or 4.5 percent, to $45.18. Gap said its profits rose 10 percent in the second quarter, helped by lower expenses and higher sales. The company also said it plans to expand in India.

NO AIR IN AEROPOSTALE: Another clothing chain, Aeropostale, was not as fortunate as Gap. The company reported a loss for the quarter and cut its full-year sales outlook. Aeropostale plunged 38 cents, or 10 percent, to $3.53.

BONDS AND COMMODITIES: U.S. government bond prices were little changed, a sign that investors were hesitant to make any large bets after Yellen's speech. The yield on the 10-year Treasury note was flat at 2.41 percent. Benchmark U.S. crude oil fell 31 cents to $93.65 a barrel in New York. In metals trading, gold rose $4.80 to $1,280.20 an ounce, silver fell three cents to $19.39 an ounce and copper rose three cents to $3.20 a pound.