US STOCKS-S&P 500 in bear market territory after data

(Updates with reaction to ISM services data)

NEW YORK, July 3 (Reuters) - U.S. stocks fell on Thursday, pushing the S&P 500 index below a level that signifies the onset of a bear market, after a report showed an unexpected contraction in the U.S. services sector in June.

The S&P 500 hit a low of 1,252.01, more than 20 percent below its October 2007 closing high. To confirm a bear market, the index has to end the session at least 20 percent below its recent closing high.

The Dow Jones industrial average .DJI was up 7.33 points, or 0.07 percent, at 11,222.84. The Standard & Poor's 500 Index .SPX was down 2.68 points, or 0.21 percent, at 1,258.84. The Nasdaq Composite Index .IXIC was down 13.88 points, or 0.62 percent, at 2,237.58. (Reporting by Walker Simon; Editing by Kenneth Barry)