U.S. equities closed lower Thursday, with health care falling approximately 1 percent, a day ahead of a key speech from Federal Reserve Chair Janet Yellen.
"If all eyes are going to be on Janet Yellen tomorrow, everyone's going to be disappointed," said Art Hogan, chief market strategist at Wunderlich Securities. " She hasn't stumbled into tipping her hand yet, and she's been on the job for a few years."
The Dow Jones industrial average closed about 30 points lower, with UnitedHealth Group contributing the most losses. The S&P 500 fell about 0.1 percent, with health care lagging. The sector had posted its worst day since June 24 on Wednesday.
"If we look back to last year, it looks like history is repeating itself," said Mike Bailey, director of research at FBB Capital Partners. "I think investors need to be cautious on health care."
The sector fell Wednesday after presidential candidate Hillary Clinton tweeted about Mylan's price increases of the allergy drug EpiPen. Mylan shares were down more than 1 percent in afternoon trade.
But "until we see what kind of Congress we get, none of that is meaningful," said Kim Forrest, senior equity analyst at Fort Pitt Capital.
The Nasdaq composite closed about 0.1 percent lower, and posted its first two-day losing streak since late June.
"There is definitely a lack of volatility and a lack of volume in the market," said Fort Pitt Capital's Forrest.
Quincy Krosby, market strategist at Prudential Financial, said "I think [Yellen's] going to stick to her script that the Fed is data dependent," adding that Yellen may not want to tip her hand before the release of the August jobs report.
"It's difficult to believe she's going to be specific about a rate hike," she said.
Yellen is scheduled to speak Friday morning in Jackson Hole, Wyoming.
The three major indexes have held in a tight range recently amid low trading volume and a lack of volatility. On Thursday, the S&P recorded its 34th straight session without a 1 percent move on a closing basis.
"It's hard to attract new buyers given these valuations, but it's also hard to get people to sell because of the lack yield elsewhere," said Bruce Bittles, chief investment strategist at Baird.
The market has "been in wait-and-see" mode, Prudential's Krosby said.
Investors also analyzed strong economic data released Thursday. Initial jobless claims fell for a third straight week to to 261,000. Durable goods orders for July rose 4.4 percent, above expectations.
"US durable goods data was really smashing and it has made a lot of difference with respect to what Yellen will say tomorrow," Naeem Aslam, chief market analyst at Think Markets, said in a note to clients. "The data has made Yellen a lot more confident especially if she wants to occupy the the hawkish tone."
Market expectations for a September rate hike were at 24 percent Thursday and around 50 percent for December, according to the CME Group's FedWatch tool.
Dallas Fed President Robert Kaplan said in a Thursday interview with CNBC that the case for raising interest rates is gaining strength.
U.S. oil prices, meanwhile, settled 1.2 percent higher at $47.33 a barrel amid a lower dollar. WTI traded slightly lower earlier in the session.
U.S. Treasurys fell, with the two-year note yield near 0.79 percent and the benchmark 10-year yield at 1.57 percent. The Treasury Department also sold $28 billion in seven-year notes at a high yield of 1.423 percent.
The dollar fell against a basket of currencies, with the euro near $1.128 and the yen around 100.5.
In corporate news, Tiffany shares rose more than 6 percent to lead the S&P after posting quarterly earnings that easily beat expectations. Meanwhile, discount retailers Dollar General and Dollar Tree saw their stocks falling after missing estimates on earnings, revenue and same-store sales.
Overseas, the pan-European Stoxx 600 index fell 0.84 percent. Asian markets closed mostly lower, with the Nikkei slipping 0.25 percent and the Shanghai composite falling 0.57 percent.
The Dow Jones industrial average fell 33.07 points, or 0.18 percent, to close at 18,448.41, with UnitedHealth Group leading decliners and Cisco Systems the top riser.
The dropped 2.97 points, or 0.14 percent, to end at 2,172.47, with health care leading five sectors lower and materials leading advancers.
The Nasdaq slipped 5.49 points, or 0.11 percent, to 5,212.20.
Advancers were a step ahead of decliners at the New York Stock Exchange, with an exchange volume of 705 million and a composite volume of 2.905 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded higher, near 14.
Gold futures for December delivery settled $5.10 lower at $1,324.60 per ounce.
On tap this week:
*Planner subject to change.
Earnings: Autodesk, GameStop, Pure Storage, Splunk
Earnings: Big Lots
Fed Chair Janet Yellen speaks at Jackson Hole, Wyoming
8:30 a.m. Real GDP Q2 (second); international trade
9:45 a.m. Services PMI
10 a.m. Consumer sentiment