* IMF warns Greece needs debt extension
* June nonfarm payrolls increase less than expected
* Average hourly earnings unchanged
* Seven of the 10 S&P sectors down
* Indexes down: Dow 0.26 pct, S&P 0.18 pct, Nasdaq 0.32 pct (Updates prices)
By Sweta Singh
July 2 (Reuters) - U.S. stocks extended losses on Thursday after the International Monetary Fund warned Greece may need a large debt writeoff, and muted U.S. jobs data dampened the economic outlook.
Seven of the 10 major S&P sectors were in the red in afternoon trading, after a positive opening.
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 way the Fed may act in September.
The Fed, which has kept short-term rates near zero since December 2008, has said it will raise rates only if it sees a sustained economic recovery. An interest rate hike could increase borrowing costs for companies.
“It is a slightly disappointing payroll number. If anything, it buys the Fed a little more time before the first rate hike,” said Wilmer Stith, a fixed income portfolio manager at Wilmington Trust in Baltimore.
Trading volume remained low ahead of the long weekend as markets will remain closed on Friday to observance the Independence Day holiday.
At 13:34 a.m. EDT (1734 GMT) the Dow Jones industrial average was down 46.64 points, or 0.26 percent, at 17,711.27, the S&P 500 was down 3.67 points, or 0.18 percent, at 2,073.75 and the Nasdaq Composite was down 16.09 points, or 0.32 percent, at 4,997.03.
BP’s U.S.-listed shares rose 5.6 percent to $41.48 after the company agreed to settle claims from the Gulf of Mexico oil spill for $18.7 billion.
HealthNet rose 9.2 percent to $71.04 after Centene Corp said it would buy the healthcare management company for $6.3 billion.
UnitedHealh Group was down 2 percent, making it the biggest drag on the Dow.
Xoom Corp shares jumped 22 percent to $25.24 a day after PayPal, eBay’s payments division, said it would buy the digital money transfer provider. EBay rose nearly 1.4 percent.
Western Union fell 6.3 percent to $19.11 after Evercore ISI cut its rating on the stock to “hold” from “buy”, citing the Xoom deal.
DuPont fell 2.2 percent to $60.10 and was the top percentage loser on the Dow Industrial Average after RBC cut price target on the stock.
Declining issues outnumbered advancing ones on the NYSE by 1,583 to 1,405, for a 1.13-to-1 ratio on the downside. On the Nasdaq, 1,777 issues fell and 914 advanced for a 1.94-to-1 ratio favoring decliners.
The S&P 500 index showed 17 new 52-week highs and 7 new lows, while the Nasdaq recorded 43 new highs and 66 new lows. (Editing by Saumyadeb Chakrabarty)