* HP drops in premarket after results, outlook

* Day two of Yellen testimony on deck

* New home sales data expected at 10 a.m.

* Futures off: Dow 2 pts, S&P 2.5 pts, Nasdaq 8.75 pts (Adds quote, Target earnings, updates prices)

By Chuck Mikolajczak

NEW YORK, Feb 25 (Reuters) – U.S. stocks index futures pointed towards a flat open on Wednesday, after the Dow and S&P 500 climbed to their latest records, before a second day of testimony from Federal Reserve Chair Janet Yellen and data on the housing market.

The Fed chair told a congressional committee that the Fed is preparing to consider increases “on a meeting-by-meeting basis,” a subtle change that helps to lay a foundation for the central bank’s first rate hike since 2006, although the timing of the liftoff was still in question. Yellen’s second day of testimony is set to begin at 10 a.m. (1500 GMT).

“There is a pregnant pause in the market this morning,” said Peter Kenny, chief market strategist at Clearpool Group in New York.

“Markets are waiting to see if there is any further insight into the timeline in the normalization of rates, any shift in terminology that would indicate a more certain timeline or a significant shift in that timeline.”

Also due at 10 a.m. (1500 GMT) is new home sales data for January, with expectations calling for sales to dip slightly to a seasonally adjusted annual rate of 470,000 units after an unexpectedly strong 481,000 in December.

S&P 500 e-mini futures were down 2.5 points and fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract, indicated a flat open. Dow Jones industrial average e-mini futures fell 2 points and Nasdaq 100 e-mini futures lost 8.75 points.

Along with lifting the Dow and S&P to their latest records, Yellen’s comments helped push the Nasdaq to a 10th straight advance, the longest winning streak for the index since July 2009. After a sluggish start to the year, the Dow is up 6.1 percent in February, the S&P is up 6 percent and the Nasdaq has rallied 7.2 percent for the month.

Lowe’ Companies advanced 2.4 percent to $ 76.42 before the opening bell. The home improvement retailer reported same-store sales well above analysts’ estimates and forecast full-year sales above expectations.

Target reported a stronger-than-expected jump in same-store sales and profits for the key fourth quarter, and forecast modest earnings growth in the current quarter. Shares in the retailer rose 1.2 percent to $ 77.85 before the opening bell.

Hewlett-Packard shares tumbled 6.7 percent to $ 35.91 in premarket. The world’s No. 2 PC maker reported flat or lower quarterly revenue in all of its operating units after the close on Tuesday, and forecast full-year earnings well below analysts’ expectations due to a strong U.S. dollar.

As earnings season winds down, Thomson Reuters data through Tuesday morning showed that of the 451 companies in the S&P 500 that have posted earnings, 69 percent have topped expectations, matching the beat rate for the last four quarters but above the 63 percent rate since 1994.

(Reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama and Nick Zieminski)