* U.S. job growth surges, wage growth remains tepid
* Traders scale back bets on 50bps rate cut in July
* Rate-sensitive bank stocks rise
* Chip stocks weak after Samsung results
* Indexes down: Dow 0.69%, S&P 0.79%, Nasdaq 0.82% (Changes quote, adds details; updates prices)
By Medha Singh and Sruthi Shankar
July 5 (Reuters) - U.S. stocks lost ground on Friday, retreating from record levels hit in the previous session, after strong U.S. job growth in June pushed investors to scale back bets on aggressive interest rate cuts by the Federal Reserve.
Labor Department data showed nonfarm payrolls rose by 224,000 jobs in June, the most in five months, and solidly beating economists' expectation of 160,000 additions.
Traders lowered their expectations of a 50 basis point rate cut by the Fed at its policy meeting on July 30-31, although hopes remained high that the central bank would start easing monetary policy.
"The jobs report showed the economy slowing but not faltering. That's important because one of the questions going into the jobs report was what it meant for the possibility of the Fed cutting rates at the end of the month," said Kate Warne, investment strategist at Edward Jones in St. Louis.
"They still may do a quarter-point cut as an insurance move, but this certainly says the data aren't weakening quickly."
Wall Street's main indexes hit a closing record high on Wednesday on hopes of major central banks embracing looser monetary policy in the wake of slowing global growth and trade tensions.
Despite solid hiring numbers, the report also pointed to persistent moderate wage gains and mounting evidence that the economy was losing momentum, which could still encourage the Fed to cut interest rates this month.
Shares of banks, which have been under pressure from falling benchmark debt yields, rose 0.7% and helped drive a slight 0.1% gain in the financial sector, which was the only major S&P sector in the positive territory.
The defensive sectors - real estate, utilities and consumer staples - shed more than 1% each as a rise in U.S. Treasury yields made the dividend-paying companies less appealing.
At 11:01 a.m. ET, the Dow Jones Industrial Average was down 186.45 points, or 0.69%, at 26,779.55, the S&P 500 was down 23.66 points, or 0.79%, at 2,972.16 and the Nasdaq Composite was down 66.81 points, or 0.82%, at 8,103.42.
Trading volumes are likely to be thin at the end of a holiday-shortened week as markets were shut on Thursday for Independence Day holiday.
The Philadelphia chip index fell 1.3% after Samsung Electronics Co Ltd forecast a steep plunge in its second-quarter operating profit, as a supply glut and rising tariffs hit global demand for electronics.
Declining issues outnumbered advancers for a 3.01-to-1 ratio on the NYSE and a 1.64-to-1 ratio on the Nasdaq.
The S&P index recorded 11 new 52-week highs and no new lows, while the Nasdaq recorded 24 new highs and 25 new lows. (Additional reporting by Uday Sampath in Bengaluru and April Joyner in New York; Editing by Anil D'Silva)