* January payrolls disappoint, December revised up slightly
* Spot VIX falls to trade below VIX futures
* Dow flat, S&P up 0.2 pct, Nasdaq up 0.3 pct
By Rodrigo Campos
NEW YORK, Feb 7 (Reuters) - U.S. stocks edged up on Friday as a weak reading on the labor market was partly blamed on the weather and initial disappointment was replaced with expectations of further economic strength.
Nonfarm payrolls rose 113,000 in January on an expectation of a 185,000 gain. December payrolls were raised only 1,000 to 75,000. The unemployment rate hit a new five-year low of 6.6 percent.
Strong job gains in construction hint that cold weather was probably not a major factor in January job creation, but traders appeared to expect an upward revision. The data also showed job gains in key sectors including manufacturing.
“Investors are giving the report the benefit of the doubt because of the weather situation,” said Donald Selkin, chief market strategist at National Securities in New York, which has about $3 billion in assets under management.
“What’s interesting is that stocks (futures) initially got killed after the report came out, but now we’re pretty sharply higher. That’s a strong sign that we’ve bottomed out.”
Concern about recent soft U.S. data added to worries about growth in China and a selloff in emerging market currencies and equities to take stocks lower worldwide in the past weeks.
Near-term concerns have subsided, however, and the spot price for protection against drops in the S&P 500 is again below front-month contracts, following a brief inversion of that curve. The CBOE volatility index fell 6.4 percent to 16.13 after trading above 21 earlier this week. Three-month VIX futures ticked lower to 16.67.
As investors await a batch of fresh data in the coming month, previous expectations for sustained U.S. economic growth are still supporting stock prices.
“There’s a favorable backdrop for further economic growth,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
“Near-term direction is likely to be set by technicals rather than fundamentals,” he said, adding the S&P could test its 200-day moving average, nearly 4 percent below current prices. “But there’s more upside than downside at these levels,” he said.
The benchmark index hit a session high right at its 14-day moving average. It hasn’t traded above it since Jan. 23.
The Dow Jones industrial average fell 2.38 points or 0.02 percent, to 15,626.15, the S&P 500 gained 3.85 points or 0.22 percent, to 1,777.28 and the Nasdaq Composite added 12.85 points or 0.32 percent, to 4,069.971.
The S&P 500 fell this week as much as 6 percent from a record high hit last month and was facing its fourth weekly decline in a row, a streak not seen since July-August 2011.
The tech sector got a boost from Apple after the iPhone maker said it bought $12 billion worth of shares via an accelerated share repurchase program and $2 billion more from the open market in the two weeks since it reported earnings. Apple shares were up 1.6 percent at $520.81.
Shares of online travel agency Expedia jumped 13.9 percent to $74.17 a day after it posted a higher-than-expected quarterly profit. Rival Priceline.com added 2.2 percent to $1,163.48.
According to Thomson Reuters data, of the 343 companies in the S&P 500 that have reported earnings through Friday morning, 67.9 percent have topped Wall Street expectations, slightly above the 67 percent beat rate for the past four quarters and ahead of the 63 percent rate since 1994.
LinkedIn shares fell 8.7 percent to $204 after the online network for professionals gave revenue forecasts that were below those of analysts.
Shares of Fairway Group Holdings tumbled 27.4 percent to $8.30 a day after it posted quarterly results and announced changes in management.