* Weekly jobless claims fall to 249,000 vs. est. 257,000
* Dollar index surges to 11-week high
* Wal-Mart biggest drag on S&P 500, Dow
* Dow down 0.05 pct, S&P up 0.08 pct, Nasdaq down 0.08 pct (Updates to early afternoon)
By Yashaswini Swamynathan
Oct 6 (Reuters) - Wall Street was little changed on Thursday, a day ahead of a crucial employment report that would show whether the economy is strong enough to absorb an interest rate hike.
A growing number of U.S. Federal Reserve officials have argued for higher rates as the labor market remains solid and inflation inches towards the central bank's 2 percent target.
The view was encouraged by a report that showed the number of Americans filing for unemployment benefits fell to a near 43-year low last week.
"At the moment, what is driving the U.S. market is a repricing around expectations of near-term Fed action," said Bill Merz, investment strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota.
Traders raised the odds of a rate hike to 64 percent for December, up from 60 percent before the jobless claims report was released, according to the CME Group's FedWatch tool.
The dollar index surged to a 11-week high against a basket of major currencies. Oil prices also hit a four-month high.
At 12:27 p.m. ET (1627 GMT), the Dow Jones Industrial Average was down 10.03 points, or 0.05 percent, at 18,271.
The S&P 500 was up 1.67 points, or 0.08 percent, at 2,161.4 and the Nasdaq Composite was down 4.47 points, or 0.08 percent, at 5,311.55.
"We're in a period where the market may act in fits and starts as we get new data," Merz said.
Eight of the 11 major S&P 500 indexes were higher, with technology countering a drag from healthcare stocks .
Wal-Mart dropped 2.3 percent to $69.90 and weighed the most on the S&P and the Dow after the world's largest retailer forecast flat earnings for next year.
Twitter shares plunged 21 percent after technology news website Recode said Disney and Alphabet were not in the race for the company.
Declining issues outnumbered advancing ones on the NYSE by 1,544 to 1,278. On the Nasdaq, 1,598 issues fell and 1,071 advanced.
The S&P 500 index showed nine new 52-week highs and six new lows, while the Nasdaq recorded 52 new highs and 21 new lows. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D'Silva)