GLOBAL MARKETS-S&P 500 dips, Treasury yields rise and dollar rallies following robust U.S. jobs report

(Adds market details, updates to U.S. market close)

By Stephen Culp

NEW YORK, Aug 5 (Reuters) - The S&P 500 headed lower, Treasury yields advanced and the dollar rose on Friday after the U.S. July employment report blasted past expectations, raising the odds of continued monetary tightening from the Federal Reserve.

Wall Street pared losses as the session progressed. At close, the Nasdaq joined the bellwether index in the red and the blue-chip Dow reversed course to end in positive territory.

Benchmark U.S. Treasury yields and oil prices headed higher as the stronger-than-expected payrolls data appeared to confirm the economy is not yet in recession, which increased the likelihood of more aggressive rate increases from the Fed in September.

The employment report "telegraphed some work needs to be done on the Fed's side, regarding their interest rate policy," said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. "That was certainly the market's initial reaction."

The Labor Department's employment report showed the U.S. economy added 528,000 jobs in July, more than double the 250,000 expected, while wage inflation remained hot and the participation rate edged lower.

"The payrolls number are wonderful from a demand standpoint, more people being paid is great for the economy," said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York.

Evidence of economic strength helped ease risk aversion as the week drew to a close.

"The employment data raises the prospect of a soft landing," Keator said, adding that Fed Chair Jerome Powell has "pointed to the fact that a strong labor market has not historically accompanied recessions."

The Dow Jones Industrial Average rose 76.65 points, or 0.23%, to 32,803.47, the S&P 500 lost 6.75 points, or 0.16%, to 4,145.19 and the Nasdaq Composite dropped 63.03 points, or 0.5%, to 12,657.56.

European shares fell after the U.S. jobs data stoked expectations of continued hawkish Fed policy.

The pan-European STOXX 600 index lost 0.76% and MSCI's gauge of stocks across the globe shed 0.20%.

Emerging market stocks rose 0.75%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.61% higher.

U.S. Treasury yields rose and a closely watched part of the yield curve touched its deepest inversion since August 2000 on increased odds of another 75 basis point interest rate hike from the central bank in September.

Benchmark 10-year notes last fell 42/32 in price to yield 2.8287%, from 2.676% late on Thursday.

The 30-year bond last fell 65/32 in price to yield 3.0662%, from 2.961% late on Thursday.

The dollar rallied against a basket of currencies in the wake of the employment report.

The dollar index rose 0.84%, with the euro down 0.63% to $1.0178.

The Japanese yen weakened 1.57% versus the greenback at 135.02 per dollar, while sterling was last trading at $1.2067, down 0.74% on the day.

While crude prices advanced on the prospect of strong demand, they wrapped up the week near multi-month lows due to lingering recession fears.

U.S. crude rose 0.53% to settle at $89.01 per barrel, while Brent settled at $94.92 per barrel, up 0.85% on the day.

Gold dipped as waning recession fears tarnished the safe-haven metal's luster.

Spot gold dropped 1.0% to $1,772.82 an ounce.

(Reporting by Stephen Culp in New York Additional reporting by Elizabeth Howcroft in London Editing by Chizu Nomiyama and Matthew Lewis)