* Yellen says Fed should be cautious in rate hike decision
* Russia aid convoy crossed border without OK, Ukraine says
* Indexes: Dow off 0.05 pct, S&P off 0.13 pct, Nasdaq up 0.3 pct (Updates to afternoon)
By Akane Otani
NEW YORK, Aug 22 (Reuters) - The S&P and Dow were weaker on Friday as tensions in Ukraine escalated and investors got few clues about the course of interest rates from Federal Reserve Chair Janet Yellen.
Ukraine declared on Friday that Russia had launched a “direct invasion” of its territory after Moscow sent a convoy of trucks across the border into eastern Ukraine.
NATO Secretary General Anders Fogh Rasmussen condemned the move, describing the situation as “an alarming build-up” and calling on Russia to “stop destabilising Ukraine.”
Yellen, in a speech at a central banking conference in Jackson Hole, Wyoming, said U.S. labor markets remain hampered by the effects of the Great Recession. Yellen said the Federal Reserve should move cautiously in determining when to raise interest rates.
“I think the tone from Yellen’s remarks were more hawkish than what the market was anticipating, because data has been coming in better than expected, and she’s trying to keep her options open with interest rates,” said Karyn Cavanaugh, senior market strategist with Voya Investment Management.
The Dow Jones industrial average fell 9.37 points, or 0.06 percent, to 17,030.12, the S&P 500 was down 0.91 points, or 0.05 percent, to 1,991.46 and the Nasdaq Composite added 13.12 points, or 0.29 percent, to 4,545.22.
The CBOE Volatility Index, a barometer of investor anxiety, edged up 1.5 percent to 11.93, and the S&P retreated from an intraday high it reached the previous day.
Market watchers said that although they remain concerned about the latest tensions in Ukraine, over the long term, the situation should not have a severe impact on U.S. equities.
Even with the pause in stocks’ rally, the S&P 500 was on track for its best week in four months. The benchmark index had risen for four straight sessions to start the week, its longest streak in two months, and rallied to a record closing high of 1,992.37 Thursday on positive economic data.
Retailers moved higher, led by a 6.8 percent advance in Ross Stores to $73.96 after the apparel and home fashion retailer posted second-quarter results. The S&P retail index gained 0.3 percent and was on track for its best week since late February.
Peregrine Semiconductor shares jumped 60.7 percent to $12.35 after Murata Electronics North America said it would buy the rest of chipmaker it does not already own for $12.50 per share. (Editing by Megan Davies, Bernadette Baum and Nick Zieminski)