US STOCKS-S&P, Dow dip after inflation rises; Yellen speech awaited

* Yellen to speaks at 1:00 p.m. ET

* Core inflation at highest since January 2013

* Boeing (NYSE: BA - news) biggest drag on Dow after Bombardier (Toronto: BBD-A.TO - news) jet report

* Ctrip, Expedia (NasdaqGS: EXPE - news) hit record highs on stake sale deal

* Indexes: Dow down 0.24 pct, S&P off 0.11 pct, Nasdaq up 0.08 pct (Updates to early afternoon)

By Tanya Agrawal

May 22 (Reuters) - The S&P 500 and Dow fell in early afternoon trading on Friday, retreating from recent record highs, as investors await Federal Reserve Chair Janet Yellen's economic outlook for clues on the timing of a rate hike after new data showed a rise in inflation.

Yellen is expected to highlight the economy's steady job growth, while April's consumer price index data is likely to bolster Fed's case for its first policy tightening in nearly a decade. Yellen's speech will start at 1:00 p.m. ET (1700 GMT).

Consumer prices moderated last month, data showed, but the so-called core consumer price index, which strips out food and energy costs, posted its largest gain since January 2013.

"It will give the Fed greater confidence that inflation will indeed make it to its target in the next couple of years, it increases the odds of faster Fed action," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

While the Fed, which has a 2 percent inflation target, is broadly expected to raise interest rates this year, the timing of the hike has kept the market on tenterhooks.

Recent economic data has been sluggish, prompting investors to bet that rates will stay near zero till at least the later part of the year and pushing the major stock indexes to record territory over the past couple of weeks.

Both the Dow and the S&P hit new records this week, although they have traded in a narrow range and volumes have been subdued as the quarterly earnings season draws to a close.

At 12:28 p.m. ET (1628 GMT) the Dow Jones industrial average was down 42.98 points, or 0.24 percent, at 18,242.76, the S&P 500 was down 2.29 points, or 0.11 percent, at 2,128.53 and the Nasdaq Composite was up 3.84 points, or 0.08 percent, at 5,094.63.

The dollar rose to a 3-1/2-week high against the euro and U.S. bond yields rose after the stronger-than-expected rise in core consumer prices.

Eight of the 10 major S&P 500 sectors were lower, led by a 0.7 percent drop in the teleservices index.

Boeing shares fell 1.7 percent to $144.87 and was the biggest drag on the Dow after the Wall Street Journal reported that Bombardier was considering a third model of its CSeries jetliner.

HP shares rose 3.6 percent to $35.05 after it forecast split-related costs below expectations and its quarterly profit beat market estimates.

Expedia rose 8.6 percent at a record of $115 after selling its entire stake in Chinese online travel company ELong to Ctrip.com and others. Ctrip jumped 17 percent to an all-time high of $84.50.

Aeropostale slumped 13.5 percent to $2.24 after the teen apparel retailer forecast a bigger-than-expected quarterly loss.

Declining issues outnumbered advancers on the NYSE by 1,827 to 1,111, for a 1.64-to-1 ratio on the downside. On the Nasdaq, 1,514 issues fell and 1,121 advanced for a 1.35-to-1 ratio favoring decliners.

The S&P 500 showed 24 new 52-week highs and three new lows, while the Nasdaq recorded 61 new highs and 27 new lows. (Additional reporting by Lucia Mutikani; Editing by Savio D'Souza)