US STOCKS-S&P 500, Nasdaq hit records on strong June jobs data

* 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

* Indexes up: Dow 0.47%, S&P 0.70%, Nasdaq 0.71% (Adds prices to mid-afternoon)

By Herbert Lash, Medha Singh and Devik Jain

July 2 (Reuters) - The S&P 500 and Nasdaq scaled new highs on Friday, with the S&P up for a seventh straight day, after jobs data for June showed robust hiring but persistent weakness in the labor market that will keep the Federal Reserve from raising interest rates any time soon.

The Labor Department’s employment report showed nonfarm payrolls increased by 850,000 jobs last month, but the total is 6.8 million below its peak in February 2020.

The better-than-expected data was a tentative sign that a labor shortage overhanging the U.S. economy was starting to ease but was not enough to force the Fed to raise rates.

Big tech led stocks on Wall Street higher while the yield on the benchmark 10-year U.S. Treasury note slid to 1.432%.

“For capital markets, equities and bonds, this was a goldilocks report,” said Darrell Cronk, chief investment officer at Wells Fargo Wealth & Investment Management. “There were enough jobs that you’d want to see, but not so much that it concerns people that the Fed may have to act sooner.”

The Dow Jones Industrial Average rose 162.87 points, or 0.47%, to 34,796.4, the S&P 500 gained 30.12 points, or 0.70%, to 4,350.06 and the Nasdaq Composite added 103.18 points, or 0.71%, to 14,625.55.

Investors have feared a stronger-than-expected recovery and the prospect of surging inflation that could force the Fed to pare its support and raise rates, hurting technology shares whose growth and cash flow is farther in the future.

Microsoft Corp, Apple Inc, Inc and Google parent Alphabet Inc led the rally, while financial stocks, which earn less on lower rates, fell.

Headwinds that have weighed on hiring, including jobless benefits and vaccine concerns, are likely to diminish in the fall and might help jobs growth accelerate, said David Joy, chief market strategist at Ameriprise Financial.

“But for now, the recovery in the labor market is not so robust as to bring forward any further the Fed’s eventual tightening,” Joy said.

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.

Investors will look to minutes from the Fed’s June meeting next week for the latest view on inflation, bond tapering and rates at a time when the easy monetary stance appears to be at an inflection point amid a booming U.S. economy.

Trading volumes were expected to be light heading into the long weekend, with markets shut on Monday in observance of Independence Day.

Tesla Inc slid 0.3% after it posted record vehicle deliveries for the second quarter that also beat Wall Street estimates.

Virgin Galactic Holdings jumped 3.5% 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 7.4% 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 Herbert Lash; Editing by Cynthia Osterman