U.S. stocks were modestly lower on Thursday, weighed down by a drop in healthcare and consumer names, while financials advanced slightly after two more Federal Reserve officials pushed the case for a rate hike.
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Healthcare stocks, down 0.8 percent, came under pressure for a second straight day. St. Jude Medical shares fell 5 percent after short-selling firm Muddy Waters said it bet that the shares would fall because of cyber security vulnerabilities in the company's cardiac devices.
Mylan NV shares shed 0.7 percent as the company continued to face pressure over the price of its EpiPen allergy treatment.
Consumer discretionary stocks fell 0.4 percent after disappointing results from a trio of retailers. Dollar Tree was down 9.9 percent, Dollar General off 17.7 percent, and Signet Jewelers slumped 12.6 percent.
Comments from Kansas City Fed President and voting member Esther George, as well as Dallas Fed President Robert Kaplan, followed the hawkish tone set by key Fed policymakers in recent days. They came ahead of Fed Chair Janet Yellen's speech on Friday at Jackson Hole, which investors are likely to assess for the likelihood of a rate hike.
Following the comments, traders increased their expectations of a hike in September to 24 percent, from 21 percent, while pricing in a roughly 57-percent chance of a December hike, up from 50.6 percent on Wednesday, according to CME Group's FedWatch program.
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The S&P 500 financials index, which stands to gain the most from higher rates, was up 0.28 percent. The KBW Nasdaq Bank index rose 0.39 percent, its best day in nearly two weeks.
"Clearly, the Fed is in the driver's seat. They have the stage to command investor attention in Jackson Hole," said Peter Kenny, senior market strategist at Global Markets Advisory Group, in New York.
"The division among the voting members of the FOMC is very, very clear and there is nothing we have seen in recent data that would tilt the argument to the one side of raising or the other side of remaining unchanged in September."
The Dow Jones industrial average fell 33.07 points, or 0.18 percent, to 18,448.41, the S&P 500 lost 2.97 points, or 0.14 percent, to 2,172.47 and the Nasdaq Composite dropped 5.49 points, or 0.11 percent, to 5,212.20.
One bright spot among consumer names was Tiffany, which rose 6.4 percent to $73.28 as the best performer on the S&P 500 after the jeweler's quarterly profit unexpectedly increased.
Advancing issues outnumbered declining ones on the NYSE by a 1.26-to-1 ratio; on Nasdaq, a 1.12-to-1 ratio favored advancers.
The S&P 500 posted 6 new 52-week highs and no new lows; the Nasdaq Composite recorded 88 new highs and 22 new lows.
About 5.48 billion shares changed hands on U.S. exchanges, below the 6.2 billion daily average over the last 20 sessions. (Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)