* Mega-cap stocks jump; Financials fall
* U.S. job growth far below expectations in April
* Indexes up: Dow 0.47%, S&P 0.79%, Nasdaq 1.28% (Adds comments, updates prices to early afternoon)
By Shreyashi Sanyal and Sruthi Shankar
May 7 (Reuters) - The S&P 500 and the Dow Jones Industrials hit record highs on Friday, while the technology-heavy Nasdaq index jumped 1% after weak U.S. jobs data eased worries about the Federal Reserve reducing its massive stimulus program anytime soon.
The Labor Department's closely watched employment report showed U.S. employers hired far fewer workers than expected in April, with nonfarm payrolls increasing by only 266,000 jobs last month after rising by 770,000 in March. polled by Reuters had forecast payrolls advancing by nearly 1 million jobs. Data also showed unemployment rate rose to 6.1% in April from 6.0% in March.
"One number doesn't make a trend, but it takes some of the heat off the economy overheating and inflation moving dramatically higher," said Larry Adam, chief investment officer at Raymond (NS: RYMD ) James.
"This puts less pressure on the Fed to prematurely talk about tapering."
The jobs report alleviated concerns about rising inflation and potentially higher U.S. interest rates which would weigh on the valuations of growth companies.
Ten of the 11 major S&P 500 sectors were higher in early afternoon trading, with a 1.3% rise in technology stocks .SPLRCT leading the advance.
Financials .SPSY dropped 0.1%, with interest rate-sensitive shares of lenders Bank of America (NYSE: BAC ) BAC.N , JPMorgan Chase & Co (NYSE: JPM ) JPM.N and Citigroup Inc (NYSE: C ) C.N trading lower. The S&P 500 banks sector .SPXBK fell 0.4%.
"If this is a one-off jobs report, if the economy is recovering as strongly as we anticipate, that is something that could drive yields higher and favor other value names and reopening plays at the expense of tech stocks," said Matt Weller, global head of market research at Forex.com.
At 12:02 p.m. ET, the Dow Jones Industrial Average .DJI was up 161.58 points, or 0.47%, at 34,710.11, the S&P 500 .SPX was up 33.13 points, or 0.79%, at 4,234.75 and the Nasdaq Composite .IXIC was up 174.79 points, or 1.28%, at 13,807.64.
The Nasdaq is set to fall 1.1% this week, its worst weekly decline since early March. The S&P 500 is tracking gains, while the Dow is set to mark its best weekly performance in nearly one month.
Payments firm Square Inc (NYSE: SQ ) SQ.N rose 6.3% after reporting a better-than-expected quarterly profit, as surging demand for bitcoin fueled a jump in cryptocurrency transactions on its application. device maker Roku Inc ROKU.O jumped 11.5% following upbeat revenue outlook, while fitness equipment maker Peloton Interactive PTON.O gained 6.1% as it laid out steps to improve the safety of the equipment. issues outnumbered decliners by a 2.79-to-1 ratio on the NYSE and by a 2.36-to-1 ratio on the Nasdaq.
The S&P index recorded 116 new 52-week highs and no new low, while the Nasdaq recorded 114 new highs and 34 new lows.
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