US STOCKS-Wall St falls from highs on NY Fed chief's rate comments
* NY Fed President Dudley says Sept rate hike possible
* Dollar pares losses, bond yields rise
* Indexes down: Dow 0.29 pct, S&P 0.36 pct, Nasdaq 0.47 pct (Updates to early afternoon)
By Yashaswini Swamynathan
Aug 16 (Reuters) - U.S. stocks declined the most in two weeks on Tuesday after New York Federal Reserve President William Dudley said an interest rate hike in September was possible.
Dudley's comments pulled the three main indexes away from record levels and nudged up bond yields, while the dollar pared earlier losses.
"The labor market is getting tighter and we're starting to see signs of wage gains starting to accelerate, so I think we're getting closer to that point in time when it will be appropriate to actually raise short-term rates again," Dudley, a permanent voting member of the Federal Reserve and a close ally of Fed Chair Janet Yellen, said on Fox Business Network.
The comments raised expectations among traders of an interest rate hike this year - they now see an 18 percent chance of a hike in September, up from 9 percent before Dudley's comments.
Bets on a December hike jumped to 42.6 percent from 37.4 percent, according to the CME Group's FedWatch tool. Continuación...