* Energy stocks jump over 1 pct as oil tops $80
* Cisco, Walmart drop after earnings reports
* U.S. expects China to bring proposal to trade talks
* Dow down 0.15 pct, S&P up 0.01 pct, Nasdaq off 0.03 pct (Updates to early afternoon)
By Medha Singh
May 17 (Reuters) - A surge in energy and industrial shares kept Wall Street's losses in check on Thursday, even as a rise in U.S. bond yields to a fresh seven-year high suggested more competition for equities.
The energy sector jumped 1.31 percent, giving the benchmark S&P 500 the biggest boost, as Brent crude touched $80 per barrel for the first time since November 2014.
The Russell 2000 index hit a record high for the second session in a row as small-cap companies continued to outperform.
Latest data showed the number of Americans on unemployment rolls last week fell to the lowest since 1973. Other data showed a pickup in factory activity in the mid-Atlantic region this month, with manufacturers saying they were asking for higher prices for their products.
The combination of a tightening labor market and firming inflation supports expectations the Federal Reserve will raise interest rates next month.
The industrial sector was up 0.6 percent, the second-biggest gainer among the 11 major S&P sectors.
"You have kind of a mixed bag of earnings numbers ... the economic data generally speaking was pretty good and that's leading to a little bit of mild buying in the market," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
On the Russell 2000, Nolte said, "I think you're starting to see people come into that because it's the only index that has put in a new high and you've got some interest."
At 12:46 p.m. ET the Dow Jones Industrial Average was down 36.95 points, or 0.15 percent, at 24,731.98, the S&P 500 was up 0.28 points, or 0.01 percent, at 2,722.74 and the Nasdaq Composite was down 3.81 points, or 0.05 percent, at 7,394.48.
The three rate-sensitive sectors, including real-estate and utilities, were the biggest losers.
The market had opened in the red, weighed by a drop in Cisco and a rise in U.S. 10-year Treasury yields to a seven-year high.
White House Chief Economic Adviser Larry Kudlow expects China to bring a proposal to the talks which would "extend the conversation and permit additional negotiations".
Cisco fell 2.8 percent, the most on the Dow, after the company's forecast indicated its transition to a software-focused business was a work in progress.
Walmart slipped 1.6 percent, reversing premarket gains, after it said profit margins were under pressure, despite sales and earnings beating expectations.
J.C. Penney tumbled 11.1 percent after its same-store sales missed estimates and the company cut its full-year profit forecast.
Advancing issues outnumbered decliners for a 1.52-to-1 ratio on the NYSE and for 1.97-to-1 ratio on the Nasdaq.
The S&P index recorded 24 new 52-week highs and four new lows, while the Nasdaq recorded 117 new highs and 21 new lows. (Reporting by Anil D'Silva in Bengaluru)