US STOCKS-Wall St flat; weak payrolls soothe rate-hike fears

(Corrects spelling in 12th paragraph of company name to Bally, not Balley)

* Payroll report comes in below forecasts

* P&G, Tesla rise after results, Chevron down

* Dow down 0.2 pct, S&P 500 flat, Nasdaq down 0.1 pct

By Ryan Vlastelica

NEW YORK, Aug 1 (Reuters) - U.S. stocks were little changed on Friday, paring big losses that had been indicated by trading before the market opened, as a weak July jobs report allayed concerns the Federal Reserve might raise interest rates sooner than many had expected.

Futures had indicated a second straight day of sharp losses following Thursday's selloff, which was spurred by concerns of a sooner-than-expected rate hike by the U.S. Federal Reserve.

Data showed 209,000 jobs were created in July, below the 233,000 that was expected. Analysts had speculated that a stronger-than-expected report would give the Fed flexibility to hike rates. Such a move would raise borrowing costs for individuals and companies and crimp spending, which could impact economic growth.

The jobs report "won't force the Fed to raise rates any time soon, and given all the fear that was out there yesterday, it makes sense to me that futures would come back so strongly," said Mark Grant, managing director at Southwest Securities in Fort Lauderdale.

Other data pointed to improving economic conditions, including the Institute for Supply Management's read on manufacturing, which expanded at the fastest pace in more than three years in July. Factory activity expanded in July, according to financial data firm Markit (NasdaqGS: MRKT - news) , though the pace of growth slipped from the prior month.

The Dow Jones industrial average fell 25.11 points or 0.15 percent, to 16,538.19, the S&P 500 gained 0.45 points or 0.02 percent, to 1,931.12 and the Nasdaq Composite dropped 4.77 points or 0.11 percent, to 4,365.00.

The day's top-performing sectors were all defensive, which tend to outperform in periods of economic uncertainty.

Consumer staples rose 1.1 percent as the strongest group on the day, followed by utilities, up 1 percent. Energy shares, a cyclical group that is tied to the pace of economic growth, were the weakest, off 0.6 percent.

Thursday's decline was the biggest one-day drop for the S&P since April, and it turned the Dow negative for the year. Despite Friday's rebound, the S&P remained under its 50-day moving average, a sign of weak near-term trends.

For the week, the Dow is down 2.6 percent, the S&P is down 2.5 percent and the Nasdaq is down 2 percent. It is the biggest weekly decline for all three since April.

A pair of Dow components reported earnings that topped expectations, with Procter & Gamble Co rising 3.4 percent to $79.93 but Chevron dipping 0.8 percent to $128.16.

Scientific Games Corp rose 11 percent to $9.50 after it said it would buy Bally Technologies Inc (NYSE: BYI - news) for $3.27 billion. Bally jumped 30 percent to $77.95.

Electric car maker Tesla Motors Inc (Xetra: A1CX3T - news) posted second-quarter revenue that nearly doubled from the prior year, while its adjusted earnings topped expectations. Shares (Frankfurt: DI6.F - news) rose 2.4 percent to $228.77.

Among other data, U.S. consumer sentiment edged down in July, according to the Thomson Reuters/University of Michigan Surveys of Consumers, modestly missing expectations. June construction spending fell 1.8 percent, far from the 0.5 percent rise that had been expected. (Editing by Bernadette Baum)