* Payrolls data expected to give market direction
* Fed's Bernanke to testify before Congress
* Futures: Dow up 5 pts, S&P off 0.7 pt, Nasdaq up 1 pt
* For up-to-the-minute market news see [STXNEWS/US] (Updates prices, adds quote, byline)
By Rodrigo Campos
NEW YORK, Jan 7 (Reuters) - Wall St braced Friday for a volatile reaction to a U.S. payrolls report that could confirm previous data pointing to a healing labor market.
Futures were little changed ahead of the report, due at 8:30 a.m. EST (1330 GMT), with economists expecting that the U.S. economy created 175,000 new jobs in December, the highest level since May. For details see [ID:nN06134458]
Economists revised their forecasts higher after Wednesday's surprising strong ADP private-sector employment figures, which were triple forecasts.
"The ADP data set the bar pretty high, and I think the market will move dramatically if payrolls either come above (estimates) or south of 100,000," said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
Overbought levels on the S&P 500 <.SPX> opened the door to the possibility of steep declines if payrolls disappoint. Short-term technical support for the benchmark was found near 1,260, its 14-day moving average. The S&P closed at 1,273.85 on Thursday.
S&P 500 futures
Facing a newly empowered Republican Party skeptical of the Federal Reserve's attempt to stimulate the U.S. economy, chairman Ben Bernanke may douse some of Wall Street's optimism as he delivers congressional testimony at 9:30 a.m. EST (1430 GMT). [FED/AHEAD]
"The Fed likes to have their moves telegraphed, and they've already told us they will continue with QE2," Forrest said. "If (Bernanke) says anything away from that, that would surprise the markets."
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U.S. stocks were mostly lower Thursday as soft retail sales and a sharp rise in the dollar sent both the Dow industrials <.DJI> and S&P 500 down 0.2 percent. But the Nasdaq Composite <.IXIC> rose 0.3 percent. (Reporting by Rodrigo Campos)