* 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
* Indexes down: Dow 0.45 pct, S&P 0.25 pct, Nasdaq 0.37 pct (Adds details, comments updates prices)
By Yashaswini Swamynathan
Oct 6 (Reuters) - Drug stocks dragged Wall Street lower on Thursday, while investors anxiously awaited a crucial jobs report that would help set the tone for interest rate hikes in the coming months.
A growing number of Fed officials have argued for higher rates as the labor market remains robust and inflation inches towards the central bank's 2 percent target.
The view was supported 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 after the data, which comes a day before the U.S. Labor Department releases its monthly hiring report.
At 10:51 a.m. ET (1451 GMT), the Dow Jones Industrial Average was down 82.93 points, or 0.45 percent, at 18,198.1.
The S&P 500 was down 5.41 points, or 0.25 percent, at 2,154.32 and the Nasdaq Composite was down 19.68 points, or 0.37 percent, at 5,296.34.
"We're in a period where the market may act in fits and starts as we get new data," Merz said.
All 11 major S&P 500 indexes were lower on Thursday, with healthcare weighing the most on the benchmark index.
Johnson & Johnson shares fell 0.9 percent after the U.S. Department of Homeland Security issued a warning on the company's insulin pumps.
Pfizer fell 1.06 percent after agreeing to sell its infusion therapy business to ICU Medical Inc for $1 billion in cash and stock.
Wal-Mart dropped 2.7 percent to $69.75 and was the top drag on the S&P and the Dow after the world's largest retailer forecast flat earnings for next year.
Twitter shares plunged 18.6 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 1,996 to 774. On the Nasdaq, 1,813 issues fell and 734 advanced.
The S&P 500 index showed nine new 52-week highs and six new lows, while the Nasdaq recorded 33 new highs and 20 new lows. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D'Silva)