* Two Fed officials’ comments boost rate hike optimism
* Financials stocks give biggest boost to S&P
* Fed Chair Janet Yellen due to speak on Friday
* Indexes up: Dow 0.06 pct, S&P 0.13 pct, Nasdaq 0.22 pct (Adds details, comments, updates prices)
By Yashaswini Swamynathan
Aug 25 (Reuters) - Wall Street reversed course to eke out small gains on late on Thursday morning as financial stocks gained after two more Federal Reserve officials said the case for an interest rate hike was strengthening.
Their comments followed the hawkish tone set by key Fed policymakers in recent days and came ahead of Fed Chair Janet Yellen’s speech on Friday at Jackson Hole, which will be assessed to see if she takes an aggressive stance.
“I do think it is time to move that rate,” Kansas City Fed President and voting member, Esther George, told CNBC, while Dallas Fed President Robert Kaplan said the central bank was “moving toward being able to take another step.”
Following the comments, traders sharply increased their expectations hike in September to 24 percent from 18 percent, while they are pricing in a roughly 55 percent chance of a December hike, according to CME Group’s FedWatch program.
Six of the 10 major S&P 500 indexes were higher, with the biggest boost coming from the financial sector’s 0.44 percent gain. Financials stand to gain the most from higher rates.
“There is healthy skepticism about the Fed raising rates ahead of Yellen’s comments tomorrow,” said Adam Sarhan, chief executive officer at Sarhan Capital.
“Throughout this year they flirt with the idea of a rate hike, but when push comes to shove, they back off and kick the can down the road.”
At 11:32 a.m. EDT the Dow Jones Industrial Average was up 10.86 points, or 0.06 percent, at 18,492.34.
The S&P 500 was up 2.91 points, or 0.13 percent, at 2,178.35 and the Nasdaq Composite was up 11.34 points, or 0.22 percent, at 5,229.04.
Data on Thursday showed an unexpected drop in jobless claims last week and a rise in new orders for manufactured capital goods in July, also suggesting that the economy was resilient enough to absorb a rate hike.
The materials sector’s 0.57 percent gain was the biggest among the S&P sectors, while the energy index’s 0.14 percent drop, despite higher oil prices, led the decliners.
Mylan rose 2.3 percent to $44.16 after the drugmaker said it would reduce the out-of-pocket cost of its allergy treatment EpiPen.
Tiffany rose 5.6 percent to $72.67 after the jeweler reported an unexpected rise in quarterly profit. The stock was the top percentage gainer on the S&P 500.
Advancing issues outnumbered decliners on the NYSE by 1,780 to 1,010. On the Nasdaq, 1,628 issues rose and 1,007 fell.
The S&P 500 index showed 5 new 52-week highs and no new lows, while the Nasdaq recorded 48 new highs and 17 new lows. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D‘Souza)