* Second reading of Q1 GDP at 0.8 pct vs. 0.9 pct est.
* GameStop drops after forecast falls short of expectations
* Ulta Salon jumps after raising full-year forecast
* Indexes up: Dow 0.01 pct, S&P 0.14 pct, Nasdaq 0.36 pct (Updates to early afternoon)
By Tanya Agrawal
May 27 (Reuters) - Wall Street trimmed gains in early afternoon trading on Friday after Federal Reserve Chair Janet Yellen said it would likely be appropriate to raise rates “in the coming months.”
Investors are looking for clues on the timing of the next rate hike from Yellen’s speech, which comes after comments from several policymakers earlier this week that the U.S. economy has the capacity to absorb a rate hike.
“The economy is continuing to improve ... growth looks to be picking up,” Yellen said in remarks in Boston. “If that continues and if the labor market continues to improve, and I expect those things to occur ... in the coming months such a move would be appropriate.”
Yellen said she is concerned that the Fed has little room to cut rates if there is an adverse shock to the economy
After Yellen’s speech, traders raised their expectations of a June rate hike to 34 percent from 30 percent, according to CME Group.
The Fed next meets on June 14-15.
At 13:41 p.m. ET (1741 GMT) the Dow Jones industrial average was up 2.33 points, or 0.01 percent, at 17,830.62, the S&P 500 was up 3.02 points, or 0.14 percent, at 2,093.12 and the Nasdaq Composite was up 17.52 points, or 0.36 percent, at 4,919.28.
Nine of the 10 major S&P sectors were higher, with the consumer discretionary and technology indexes leading the gainers.
Data on Friday showed the U.S. economic growth slowed in the first quarter although not as sharply as initially thought.
Gross domestic product rose at a 0.8 percent annual rate as opposed to the 0.5 percent pace reported last month - the slowest growth since the first quarter of 2015. Economists polled by Reuters expected a 0.9 percent growth rate.
Wall Street closed mostly flat on Thursday as investors took a breather following two days of strong gains.
Cyber security firm Palo Alto’s shares were down 11.7 percent at $130.91 after posting a wider-than-expected quarterly loss.
GameStop fell 5.3 percent to $28.38 after the video-game retailer forecast lower-than-expected revenue and profit for the current quarter.
Advancing issues outnumbered decliners on the NYSE by 1,752 to 1,183. On the Nasdaq, 1,733 issues rose and 992 fell.
The S&P 500 index showed 20 new 52-week highs and no new lows, while the Nasdaq recorded 56 new highs and 16 new lows. (Reporting by Tanya Agrawal; Editing by Anil D‘Silva)