US STOCKS-S&P 500, Nasdaq set for record open after strong June jobs report

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* Nonfarm payrolls rise more than expected in June

* Virgin Galactic jumps on announcing crewed flight plan

* Didi drops as China to conduct cyber security probe

* Futures up: Dow 0.26%, S&P 0.30%, Nasdaq 0.55% (Adds comment, details; updates prices)

July 2 (Reuters) - The S&P 500 and the Nasdaq were set to open at record highs on Friday after a better-than-expected monthly employment report as companies raised wages and offered incentives to draw millions of reluctant unemployed Americans back into the labor force.

Futures moved higher after the Labor Department’s closely watched employment report showed nonfarm payrolls increased by 850,000 jobs last month, after rising 583,000 in May. The unemployment rate rose to 5.9% from 5.8% in May.

“Improvement in the labor market overall ... allows the market to continue in its current phase of slowly and gradually increasing which is the best scenario,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

“The market doesn’t seem to know whether it wants good news, which then results in potentially sooner rate hikes, or bad news which results in more liquidity and thus potentially more inflation. So it’s kind of a tricky balance.”

Markets have been spearheaded by inflation and economic data in the past few sessions, with investors fearing a potentially stronger-than expected economic recovery and runaway inflation could force the Federal Reserve to pare back its support.

Still, after a strong end to the first half of the year, the S&P 500 began the second half with its sixth consecutive all-time closing high in the previous session amid a broad-based rally led by so-called economy-linked “value” stocks.

Focus now also shifts towards the second-quarter earnings season and progress on President Joe Biden’s infrastructure bill that could help the equity market keep the momentum.

The Democratic-controlled U.S. House of Representatives approved a $715 billion surface transportation and water infrastructure bill on Thursday in what Democrats see as an early step toward sweeping infrastructure legislation that Congress hopes to complete in September.

Next week, markets will look to minutes from the Fed’s June policy meeting which will offer more details on the policymakers thinking on inflation, bond tapering and interest rates at a time when easy monetary policy appears to be at an inflection point amid a booming U.S. economy.

At 8:46 a.m. ET, Dow e-minis were up 91 points, or 0.26%, S&P 500 e-minis were up 12.75 points, or 0.3%, and Nasdaq 100 e-minis were up 80.25 points, or 0.55%.

Tesla Inc fell 0.7% even after it posted record vehicle deliveries for the second quarter that also beat Wall Street estimates.

Virgin Galactic Holdings jumped 23% after the space tourism firm said billionaire entrepreneur Richard Branson would travel to the edge of space on the company’s test flight on July 11, beating out fellow aspiring billionaire astronaut Jeff Bezos.

Didi Global Inc slipped 9% after China’s cyberspace administration said it would conduct a new investigation into the Chinese ride-hailing giant to protect national security and the public interest. (Reporting by Devik Jain in Bengaluru; Editing by Maju Samuel)