* Inflation to likely rebound -Fed's Fischer
* Oil prices jump more than 5 pct
* Phillips 66 up after Buffett discloses stake
* Indexes down: Dow 0.76 pct, S&P 0.85 pct, Nasdaq 0.97 pct (Updates to afternoon)
By Noel Randewich
Aug 31 (Reuters) - Wall Street was lower on Monday afternoon as investors worried that the Federal Reserve may start raising interest rates in September, although a rally in oil boosted energy stocks.
The market was poised for its worst monthly drop over three years after being pummeled in the past two weeks due to worries about the health of China's economy and the timing of the first U.S. rate hike in almost a decade.
Comments on Saturday by Fed Vice Chairman Stanley Fischer added to fears that the central bank may raise rates when it meets next month.
Fischer said U.S. inflation would likely rebound as pressure from the dollar fades, allowing the Fed to raise interest rates gradually.
"What you see in the market today is caused by Fischer's comments over the weekend. If they move in September, it's going to cast a lot of doubt about where they will stop," said Stephen Massocca, chief investment officer at Wedbush Equity Management LLC in San Francisco.
The S&P energy index rose 0.8 percent and was on track for its best four-day gain in seven years, boosted by ConocoPhillips and Phillips 66.
Crude prices jumped after data indicated surprise cuts to U.S. oil production and as OPEC said it was ready to talk to other producers about the recent drop in prices.
Fischer's remarks at the global central banking conference in Jackson Hole, Wyoming suggested the Fed could look beyond recent stock market turmoil brought on by fears that China's economy is faltering.
"We can still expect to see some significant drops in the market until we get some direction from the Fed regarding a rate increase," said John DeClue, chief investment officer of U.S. Bank Wealth Management.
At 2:19 pm, the Dow Jones industrial average was down 0.76 percent at 16,516.17 and the S&P 500 was 0.85 percent lower at 1,971.91.
The Nasdaq Composite dropped 0.97 percent to 4,781.67.
Nine of the 10 major S&P sectors were lower with the utilities index's 1.8 percent fall leading the decliners.
Twitter gained 3.69 percent after SunTrust Robinson raised its rating to "buy" from "neutral".
Phillips 66 was up 2.6 percent after Warren Buffett's Berkshire Hathaway disclosed a $4.48 billion stake in the oil refiner.
Declining issues outnumbered advancers on the NYSE by 1,793 to 1,229. On the Nasdaq, 1,511 issues fell and 1,229 advanced.
The S&P 500 index showed one new 52-week high and two new lows, while the Nasdaq recorded 23 new highs and 16 new lows. (Additional reporting by Tanya Agrawal; Editing by Meredith Mazzilli)