US STOCKS-Wall St retreats as cyclicals weigh; small-caps sag

* Focus turns to earnings season

* Despite session's decline, Dow ends slightly above 17,000

* Defensive sectors outperform for the day

* Dow off 0.3 pct; S&P 500 down 0.4 pct; Nasdaq off 0.8 pct (Updates to close)

By Chuck Mikolajczak

NEW YORK, July 7 (Reuters) - U.S. stocks dipped on Monday, retreating from last week's record levels as investors hesitated to make big bets before the start of earnings season.

Cyclical stocks, which are tied to the pace of economic growth, ranked among the weakest of the day. The S&P industrial sector index fell 0.7 percent. The only sectors finishing the session on the plus side were defensive groups such as utilities, up 0.4 percent, telecom, up 0.3 percent and consumer staples, up 0.1 percent.

Small-cap stocks also underperformed, with the S&P Small-Cap 600 index down 1.5 percent. The Russell 2000 fell 1.8 percent, its biggest percentage drop since April 25.

Wall Street hit a number of milestones on Thursday, the final session before the Independence Day holiday, with the Dow topping 17,000 for the first time and the S&P 500 closing at a record high after a strong June jobs report.

"I wouldn't read a lot into this today. I would view it as really nothing more than just a period of digesting the numbers from last week," said David Regan, Western U.S. Region head of investments for J.P. Morgan Private Bank in Los Angeles.

While the U.S. stock market's uptrend is still viewed as intact, trading may be light with few major catalysts on deck. Action may pick up later this week with the release of quarterly results from Alcoa Inc (NYSE: AA - news) and Wells Fargo (Hamburg: NWT.HM - news) & Co.

"Most people view the first quarter as an anomaly for a number of reasons, and the data we have seen recently is really confirming that - people want to see that in the earnings as well," Regan said.

Dozens of major companies are scheduled to report next week, including numerous Dow components. Profits are forecast to grow 6.2 percent for the quarter, according to Thomson Reuters data, but investors see a slight chance that profits could return to double-digit growth for the first time in nearly three years.

The Dow Jones industrial average fell 44.05 points or 0.26 percent, to end at 17,024.21. The S&P 500 declined 7.79 points or 0.39 percent, to 1,977.65. The Nasdaq Composite dropped 34.40 points or 0.77 percent, to 4,451.53.

Among the 30 Dow components, 19 declined for the day.

As the June payrolls report confirmed expectations that the economy rebounded in the second quarter, some analysts thought the data could prompt the U.S. Federal Reserve to raise interest rates sooner than anticipated.

Goldman Sachs (NYSE: GS-PB - news) estimated that the Fed could raise rates in the third quarter of 2015, compared with an earlier estimate of the first quarter of 2016.

BioDelivery Sciences International Inc (NasdaqCM: BDSI - news) shares surged 8.9 percent to $13.06 after the company said its experimental pain drug, which it made with Endo International (NasdaqGS: ENDP - news) Plc, was found effective in a late-stage trial.

GT Advanced Technologies (Xetra: A1JDP0 - news) tumbled 15.6 percent to $16.50 on heavy volume after UBS (NYSEArca: FBGX - news) removed the company from its U.S. Key Calls list.

Volume was light, with only about 4.81 billion shares traded on U.S. exchanges, well below the 5.8 billion average in June, according to data from BATS Global Markets.

Declining stocks outnumbered advancing ones on the New York Stock Exchange by a ratio of 7 to 3, while on the Nasdaq, about four stocks fell for every one that rose. (Reporting by Chuck Mikolajczak; Editing by Nick Zieminski and Jan Paschal)