US SMALL/MIDCAPS-Energy, materials stocks gain on Fed, China

NEW YORK, Sept 7 (Reuters) - Mid- and smallcap stocks advanced on Friday as expectations for another round of quantitative easing in the U.S. and approval by China of a multi-billion dollar infrastructure program lifted materials and energy stocks.

The Labor Department said nonfarm payrolls increased by 96,000 last month, shy of the 125,000 forecast, and raised investor perceptions the Federal Reserve will pump additional money into the sluggish economy.

Energy-related stocks rose as the outlook for more stimulus sent the dollar lower and crude prices higher. Demand for oil increases when the dollar eases as the commodity is priced in the greenback.

The S&P MidCap energy index gained 2 percent and the S&P SmallCap energy index advanced 2.6 percent.

Materials stocks also rose after China approved 60 infrastructure projects worth more than $150 billion in an effort to jumpstart an economy mired in its worst slowdown in three years. The S&P MidCap materials index climbed 1.2 percent and the S&P SmallCap materials index gained 1.6 percent.

"The energy sector is strong - that would be tied to possible rounds of QE which would be beneficial to the price of oil going up," said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.

"In China, some stimulus that is rail-related is going to leave strong demand for your steel and your iron ores and things like that."

The S&P MidCap 400 index advanced 0.6 percent while the S&P SmallCap 600 index gained 0.4 percent. In comparison, the benchmark S&P 500 rose 0.2 percent.

MidCap Green Mountain Coffee Roasters Inc jumped 11.9 percent to $27.50 after Lazard Capital Markets initiated coverage on the stock with a "buy" rating and $39 price target, citing the growth prospects of its signature K-Cups and its relatively low stock valuation.

Smallcap Quiksilver Inc surged 20.6 percent to $3.69 after the surfwear and boardsport equipment retailer posted third-quarter earnings that topped Wall Street expectations.