(Adds settled oil prices; recasts with Fed meeting; adds investor quote, updates throughout)
* Healthcare pulls Wall Street slightly lower
* Dollar subdued before Yellen
* Oil rebounds nearly 1 percent
By Hilary Russ
NEW YORK, Aug 25 (Reuters) - The start of a central bankers' meeting in the mountains of Wyoming, which could clarify the path of U.S. interest rate policy, kept most investors from making big bets on Thursday.
Federal Reserve Chair Janet Yellen will deliver the keynote speech on Friday, when she may struggle to convince financial markets she can steer a divided U.S. central bank to raise interest rates at least once in 2016 after it started the year with four hikes on its radar. expect three rate increases in 2017 in addition to two hikes this year. Financial markets, however, show investors see only one rate increase from now through the end of 2017.
"We still have got this disconnect between markets and the Fed," St. Louis Federal Reserve President James Bullard told reporters last week.
The waiting game left many markets trudging along sluggishly all week. The U.S. dollar, which is looking for any signal on whether rates will rise this year, inched lower on Thursday to $94.765 against a basket of major currencies .DXY . 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 .DJI fell 41.8 points, or 0.23 percent, to 18,439.68, the S&P 500 .SPX lost 5.16 points, or 0.24 percent, to 2,170.28 and the Nasdaq Composite .IXIC dropped 14.35 points, or 0.28 percent, to 5,203.35. stocks pulled Wall Street slightly lower. The sector was last down 0.8 percent, after short-selling firm Muddy Waters said it bet that shares of St. Jude Medical Inc. STJ.N would fall because of cyber security vulnerabilities in its cardiac devices. of the pacemaker manufacturer, which fell the most of all firms in the S&P 500 Health index .SPXHC , lost as much as 10 percent but were last down 5 percent.
Slumping healthcare stocks also dragged European markets lower after White House candidate Hillary Clinton demanded price cuts on a successful drug.
On the FTSE 100, Hikma HIK.L , Shire SHP.L and AstraZeneca AZN.L fell between 1.4 percent to 3.5 percent. London's FTSE .FTSE closed 0.28 percent lower. losses followed Democratic nominee Clinton's call for a lower price for Mylan NV's MYL.O allergy drug EpiPen, which has become four times more expensive in the past decade. serves to strike fear into the hearts of healthcare groups and their investors everywhere," Mike van Dulken, head of research at Accendo Markets, said in a note. After initially rising, Mylan shares fell 0.7 percent.
Oil prices rebounded on expectations that the dollar would weaken ahead of Yellen's speech, but pared some gains after a Reuters interview with the Saudi Energy Minister that cast doubts about an OPEC output freeze. crude LCOc1 was up 65 cents, or 1.33 percent, at $49.70 a barrel. U.S. crude CLc1 settled at $47.33, up 56 cents, or 1.20 percent.
The euro rose 0.1 percent against the dollar to $1.1276 EUR= . The euro rose despite a weak German IFO survey showing German business morale deteriorated sharply in August as Brexit shock weighed on sentiment. confidence in Germany has clearly worsened," Ifo head Clemens Fuest said in a statement. "The German economy has fallen into a summer slump."
U.S. Treasury yields wafted upwards, with the yield on 30-year bonds last at 2.265 percent. Data showed new orders for U.S. manufactured capital goods increased in July for the second straight month. on 7-year Treasuries rose 1 basis point to 1.4138 percent after auction US7YT=RR .