US STOCKS-Wall St set to open modestly lower as rate hike timing weighs

* Wall St banks expect Fed rate hike in September

* McDonald's up on smaller-than-expected sales decline

* Sears rises after posting smaller-than-expected loss

* Futures down: Dow 14 pts, S&P 3.25 pts, Nasdaq 7 pts (Adds details, comment, updates prices)

By Tanya Agrawal

June 8 (Reuters) - U.S. stocks were set to open modestly lower on Monday as investors digested Friday's strong jobs data, which increased expectations that the Federal Reserve could raise interest rates as soon as September.

Stronger-than-expected jobs data for May and a pickup in wages were the latest signs of improved momentum in the economy, prompting expectations of a rate hike sooner rather than later.

While the Fed is broadly expected to raise interest rates this year, the timing of the move has kept the market on tenterhooks.

Wall Street's top banks said they expect the Fed to begin raising rates in September, followed by another increase before the end of the year, according to a Reuters poll.

"I think we'll see a lot more back and forth for a while," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

"There are concerns that the Fed will be more aggressive regarding the timing of the hike and a steeper hike following the first one."

More sales of German government bonds weighed on European stock markets, while the dollar retreated after a report - later denied - that President Barack Obama had expressed concern over its strength after a year-long rally.

Higher bond yields make stocks less attractive. U.S. benchmark Treasury debt yields on Friday posted their best weekly performance in two years after strong jobs data, while German bunds hit 8-year highs.

S&P 500 e-minis were down 3.25 points, or 0.16 percent, with 152,915 contracts traded by 8:49 a.m. ET (1249 GMT). Nasdaq 100 e-minis were down 7 points, or 0.16 percent, on volume of 35,069 contracts, while Dow e-minis were down 14 points, or 0.08 percent, with 34,002 contracts changing hands.

Dow component McDonald's rose 0.5 percent to $96.05 in premarket trading after the company posted a smaller-than-expected decline in worldwide sales at established restaurants in May.

Sears Holdings (NasdaqGS: SHLD - news) ' shares rose 4.2 percent to $42.45 after the department store operator reported a smaller quarterly loss and said it plans to raise $2.6 billion from the spinoff of 235 stores into a REIT.

American Airlines (Xetra: A1G.DE - news) fell 1.2 percent to $41.21 after its CEO voiced concern on Sunday about the risk that capacity growth among airlines could depress profits. (Reporting by Tanya Agrawal; Editing by Savio D'Souza)