* Greece talks suffer setback after IMF quits
* May producer prices record biggest gain in more than 2-1/2 years
* Twitter rises after CEO quits
* Indexes down: Dow 0.9 pct, S&P 0.8 pct, Nasdaq 0.7 pct (Adds details, changes comment, updates prices)
By Tanya Agrawal
June 12 (Reuters) - U.S. stocks fell in lackluster trading and trimmed their gains for the week, pressured by a setback in Greece's debt talks and increased possibility of a September rate hike.
Still, the S&P 500 and the Dow Jones Industrial Average were on track to close higher for the week, after posting declines for two weeks in a row.
Greece said it would not cross its "red lines" as it looked to intensify political negotiations for an agreement, saying the International Monetary Fund's move to quit bailout talks was aimed at putting pressure on Athens.
Investors were also edgy ahead of the U.S. Federal Reserve's Open Market Committee meeting next week - the central bank's last meeting before September - which may provide clues on the timing of an interest rate hike.
An increase in rates will tighten the flow of easy money that has driven stocks and bond prices to record highs and raise borrowing costs for companies.
Economists and top Wall Street banks expect the Fed to raise rates in September, in what could be the central bank's first hike in almost a decade.
"We've been at the zero interest rate policy, which is the right policy during a crisis, but we're not in a time of crisis," said Tom Digenan, head of U.S. equities, UBS Global Asset Management.
"It's good for the longer-term economy to get the rate up so that you do have some bullets in the barrel when you need it."
At 11:05 a.m. ET (1505 GMT), the Dow Jones industrial average was down 160.82 points, or 0.89 percent, at 17,878.55, the S&P 500 was down 16.09 points, or 0.76 percent, at 2,092.77 and the Nasdaq Composite was down 36.39 points, or 0.72 percent, at 5,046.12.
Exxon Mobil's 1.3 percent fall weighed the most on the S&P 500, while Apple's 0.6 percent decline was the biggest drag on Nasdaq. The Dow was weighed down by UnitedHealth Group's 1.1 decline.
All the 10 major S&P 500 sectors were lower, with the energy index leading the declines as oil prices fell.
U.S. producer prices in May recorded their biggest increase in more than 2-1/2 years as the cost of gasoline and food rose, suggesting that an oil-driven downward drift in prices was nearing an end.
The stabilization in producer prices should support views that the Federal Reserve will raise interest rates this year. While the labor market had tightened, there had been few clear signs that inflation was poised to rise back toward the Fed's 2 percent target.
U.S. consumer sentiment rose more than expected in June, with the index on consumer sentiment coming in at 94.6, above the forecast of 91.5 among economists polled by Reuters.
Twitter Inc's shares were up 1.1 percent at $36.24, a day after Chief Executive Officer Dick Costolo abruptly announced he was stepping down.
Leapfrog Enterprises slumped 23.4 percent to $1.58 after the toymaker posted a wider quarterly loss.
Declining issues outnumbered advancers on the NYSE by 1,980 to 879. On the Nasdaq, 1,694 issues fell and 853 rose.
Four stocks on the S&P 500 index hit a 52-week high and eight a 52-week low. The Nasdaq recorded 40 new highs and 20 new lows. (Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)