(Recasts with preliminary close of trading)

* Atlassian ( TEAM ) surges after Q4 profit, revenue beat

* All three indexes record their biggest weekly percentage

gain since April

* July nonfarm payrolls at -23,000 versus +80,000 estimate

By Chuck Mikolajczak and Shashwat Chauhan

NEW YORK, Aug 7 (Reuters) - U.S. stocks advanced on Friday,

with the S&P closing at a record high to cap off a strong week

of gains for the major indexes, after data showed the U.S.

economy unexpectedly shed jobs last month and dampened

expectations the Federal Reserve would raise interest rates at

its September meeting.

The Labor Department said nonfarm payrolls decreased by 23,000

jobs last month, well below the estimate of economists polled by

Reuters that called for an increase of 80,000 jobs. Previously

reported job gains for the prior two months were also revised

sharply lower, while the unemployment rate fell to 4.1% last

month from 4.2% in June due to workers leaving the labor force.

Market expectations for a rate hike from the Fed at its next

meeting dropped to about 44%, according to CME FedWatch, down

from 55% in the prior session and 67% a week ago.

Signs of progress for a potential peace deal in the Iran war

have helped cool oil prices and, in turn, have eased inflation

worries that could prompt a Fed rate hike and pushed Treasury

yields lower.

A strong earnings season has also tempered concerns about

the massive spending by AI-related companies, sending each of

the three major indexes to their biggest weekly percentage gains

since mid-April.

"You probably have to lower rates to kind of stimulate job

growth, but if you lower rates, you're going to also stimulate

inflation. So you're kind of in a pickle at this point, and yet

the market's just taken off because earnings have been stellar,"

said Tom Siomades, chief market economist at AE Wealth

Management in Topeka, Kansas.

"The market should be reacting to weak job numbers and

higher inflation and the possibility of a slow-growth economy

that may need to have rates raised rather than cut, and yet it's

not. We're setting records, so go figure."

With earnings season entering the final stretch, of the 436

companies in the S&P 500 that have already reported results

through Friday morning, 85.1% have topped analyst expectations,

according to LSEG data - well above the 68% average since 1994.

Under new Fed Chair Kevin Warsh, the U.S. central bank has

offered investors little forward guidance on monetary policy,

leading market participants to focus on economic data and

commentary from policymakers.

MAJOR INDEXES POST GAINS

According to preliminary data, the S&P 500 gained

46.48 points, or 0.60%, to end at 7,756.44 points, while the

Nasdaq Composite gained 338.81 points, or 1.29%, to

26,690.62. The Dow Jones Industrial Average rose 151.33

points, or 0.28%, to 54,036.43.

Elon Musk's SpaceX surged a day after the expiry of the

first of several share lockup restrictions following its record

public offering in June.

Collaboration software maker Atlassian ( TEAM ) shot up while

chip company Microchip Tech ( MCHP ) jumped after both forecast

quarterly revenue above estimates.

Among other movers, vacation rental company Airbnb ( ABNB ) rose

as the best performer on the S&P 500 after beating

second-quarter revenue estimates. In contrast, Trade Desk ( TTD )

plummeted as the worst performer on the benchmark index

after the ad-tech firm forecast third-quarter revenue below

expectations.