US STOCKS-Wall St falls on simmering Greece worries, tepid data

* IMF warns Greece needs debt extension

* June U.S. nonfarm payrolls increase less than expected

* Average hourly earnings unchanged

* Seven of the 10 S&P sectors down

* Indexes down: Dow 0.24 pct, S&P 0.13 pct, Nasdaq 0.21 pct (Updates prices, changes byline)

By Sinead Carew

July 2 (Reuters) - U.S. stocks extended losses on Thursday after the International Monetary Fund warned Greece may need a large debt write-off, and muted U.S. jobs data dampened the economic outlook.

Seven of the 10 major S&P sectors were in the red in late afternoon trading, after a positive opening on the last day of trading before a long weekend.

IMF's warning comes as Greece readies for a Sunday referendum on an international bailout deal that Prime Minister Alexis Tsipras has urged voters to reject.

The fund said that even if Greek policies came back on track, loans made by Europe "will need to be extended significantly" and that the country would need further concessional financing.

"The market seems to be paying more attention to what may happen with Greece as well as whether or not wage growth will pick up," said Omar Aguilar, chief investment officer of equities at Charles Schwab Investment Management in San Francisco.

Average hourly earnings were unchanged in June, taking the year-on-year increase to a paltry 2.0 percent.

Nonfarm payrolls increased 223,000 last month, below the 230,000 that economists polled by Reuters had expected.

Aguilar added that people were trying to understand how the payroll numbers may affect the timing for when the Federal Reserve makes its first interest rate hike in almost a decade.

The Fed has said it will raise rates only if it sees a sustained economic recovery. An interest rate hike could increase borrowing costs for companies.

The utilities sector was the best performer in the S&P with a 1.2 percent rise. That sector has been battered with a 10.7 percent decline so far this year as investors have been anticipating an interest rate hike.

Trading volume remained low ahead of the long weekend as markets will remain closed on Friday in observance the Independence Day holiday.

At 2:58 p.m. the Dow Jones industrial average fell 42.13 points, or 0.24 percent, to 17,715.78, the S&P 500 lost 2.72 points, or 0.13 percent, to 2,074.7 and the Nasdaq Composite dropped 10.36 points, or 0.21 percent, to 5,002.77.

BP's U.S.-listed shares rose 5.5 percent to $41.42 after the company agreed to settle claims from the Gulf of Mexico oil spill for $18.7 billion.

HealthNet rose 9.7 percent to $71.36 after Centene (Stuttgart: QEN.SG - news) Corp said it would buy the healthcare management company for $6.3 billion. UnitedHealth Group fell 1.6 percent, making it the biggest drag on the Dow.

Xoom Corp shares jumped 21.6 percent to $25.18 the day after PayPal, eBay's payments division, said it would buy the digital money transfer provider. EBay (Xetra: 916529 - news) rose 1.7 percent.

Western Union fell 6.3 percent to $19.10 after Evercore ISI cut its rating on the stock to "hold" from "buy", citing the Xoom deal.

Declining issues outnumbered advancing ones on the NYSE by 1,586 to 1,432, for a 1.11-to-1 ratio on the downside; on the Nasdaq, 1,746 issues fell and 974 advanced for a 1.79-to-1 ratio favoring decliners.

The benchmark S&P 500 index was posting 17 new 52-week highs and 8 new lows; the Nasdaq Composite was recording 45 new highs and 70 new lows. (Editing by Saumyadeb Chakrabarty and Chizu Nomiyama)