US STOCKS-Futures point to jump at open after payrolls rise
* June payroll report comes in above forecasts
* Markets may be volatile with light post-holiday volume
* Investors watching situation in Egypt for oil impact
* Futures up: Dow 165 points, S&P 18.6 points, Nasdaq 29 points
NEW YORK, July 5 (Reuters) - U.S. stock index futures pointed to gains of more than 1 percent at the open on Friday as June payrolls data was much stronger than expected.
About 195,000 jobs were added in the month, above expectations for 165,000. There were also positive revisions to previous months, though the unemployment rate ticked up to 7.6 percent from 7.5 percent.
"Markets were braced for an upside surprise, and I think this exceeded even that optimism," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
Analysts had been looking to the report for insight into when the Federal Reserve might begin to slow its bond-buying stimulus program, which it has said it would do if economic growth and employment data meet its targets.
Over the past few weeks, markets have sold off on bullish data on the theory that it would mean a quicker end to stimulus. However, recent comments from Fed officials have assuaged concerns that a slowing in the Fed's $85 billion monthly bond buying was imminent.
"The initial reaction in the markets does look like good news is good news," said Brown.
S&P 500 futures rose 18.6 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 165 points and Nasdaq 100 futures rose 29 points.
Futures added to gains after the payroll report, but had been sharply higher throughout the pre-market session, taking a cue from overseas trading.
On Thursday, when U.S. markets were closed for the Fourth of July holiday, European shares jumped more than 2 percent after central banks in Britain and the euro zone signaled that they were holding steady with their stimulus.
"The payroll report is the most important data we've had in a month for what the Fed will do, but that Europe is keeping its easy money stance makes for a hugely bullish fundamental backdrop no matter what," said Adam Sarhan, chief executive of Sarhan Capital in New York.
Trading volume could be light on Friday with many traders still away from the office after the July 4 holiday, and the low participation could lead to more volatile markets.
Cyclical shares, which are tied to the pace of economic growth, are likely to show the biggest reaction to the data. Bank of America and Citigroup Inc rose in premarket trading.
The S&P 500 is down 3.2 percent from its May 21 record closing high of 1,669.16. The benchmark index has been unable to close above its 50-day moving average since June 20, a level which is now at 1,624.68.
"If we get above the 50-day, that would probably result in even more gains as technical-based buying comes into the market," Sarhan said.
U.S. crude futures rose 0.8 percent, hovering at 14-month highs. While the jobs report could give a clue on demand prospects for oil, investors are also watching unrest in Egypt, which could cause a further price spike on supply concerns.
Prices jumped early Friday after Egypt's army said its troops were 'on alert' in the provinces of Suez and South Sinai.
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