US STOCKS-Wall St slumps; S&P set for biggest weekly loss since 2012

* S&P 500 on track for biggest weekly loss since May 2012

* U.S. July payroll report comes in below forecasts

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

* Indexes down: Dow 0.7 pct, S&P 0.7, Nasdaq 0.9 pct (Updates to afternoon trading)

By Ryan Vlastelica

NEW YORK, Aug 1 (Reuters) - U.S. stocks tumbled in a volatile session on Friday, marking a second straight day of sharp declines as the latest economic data provided little clarity as to when the Federal Reserve might raise interest rates.

Stocks rose as much as 0.3 percent before turning decisively lower, putting the S&P 500 on track for its biggest weekly decline since May 2012.

The U.S. Labor Department reported that 209,000 jobs were created in July, below the 233,000 that economists had expected, while data from the Institute for Supply Management showed that manufacturing had its fastest expansion in more than three years in July.

Strong economic data has recently been viewed as a sign that the Fed might raise rates sooner than previously anticipated. Fears of a rate hike sparked Thursday's decline, which wiped out the Dow's entire gains so far this year.

"We have conflicting reports about when the Fed might or might not move, and on top of that we still have a lot of geopolitical issues that the market has to deal with," said Nick Sargen, chief economist at Fort Washington Investment Advisors in Cincinnati.

"I wouldn't use this weakness to add to positions. We're still not cheap by any means, and this could be the start of the 10 percent correction that's been long overdue."

With the day's decline, the S&P 500 is about 3.6 percent away from the all-time closing high it posted on July 24.

The Dow Jones industrial average fell 111.64 points, or 0.67 percent, to 16,451.66, the S&P 500 lost 12.95 points, or 0.67 percent, to 1,917.72, and the Nasdaq Composite dropped 41.25 points, or 0.94 percent, to 4,328.53.

Losses were broad, with more than 70 percent of companies traded on both the New York Stock Exchange and Nasdaq lower. The only sectors to rise were defensive, with consumer staples up 0.7 percent and utilities up 0.2 percent.

For the week, the Dow is down 3 percent, the S&P is down 3 percent, and the Nasdaq is down 2.7 percent.

Two Dow components reported earnings that topped expectations. Procter & Gamble Co, the world's largest maker of household products, which also said it could sell about half of its brands, rose 3.5 percent to $80, boosting consumer staples, while Chevron fell 1.2 percent to $127.65.

Scientific Games Corp rose 4.3 percent to $8.91 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 2.9 percent to $229.91.

Among other data, financial data firm Markit (NasdaqGS: MRKT - news) said factory activity expanded in July, though the pace of growth slipped from the prior month. 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 Leslie Adler)