* Biden says economic package to be trillions of dollars
* Senator Manchin dashes expectations a bit
* Nonfarm payrolls fall in December
* Tesla market cap tops $800 bln for the first time
* Dow up 0.18%, S&P 500 0.55%, Nasdaq 1.03% (Adds closing prices, comments)
By Herbert Lash
NEW YORK, Jan 8 (Reuters) - Wall Street scaled new highs on Friday as hopes of more stimulus from Washington were shaken a bit by a senator's comments but later bolstered after U.S. President-elect Joe Biden said his economic package will be in the trillions of dollars.
The latest rally in the Dow, S&P 500 and Nasdaq overcame labor market data early in the day that showed the U.S. economy shed jobs for the first time in eight months in December as the country buckled under the COVID-19 onslaught.
But late in the session, the S&P retreated slightly from a its most recent peak following a report that Democratic U.S. Senator Joe Manchin opposed bigger direct checks before addressing the coronavirus pandemic. The remarks unsettled investor who expect further stimulus payments.
"Itâ€™s amazing how sensitive we are to the slightest tweaking of when and how big the stimulus will be," said Ed Moya, senior market analyst at OANDA in New York.
"Stocks are going to start to price in a bigger economic relief package from the Biden administration," Moya said. "That is going to continue to be the driver on equities."
Biden said his administration's economic package will also include unemployment insurance and rent forbearance. The package will be unveiled next Thursday, he said.
"It is necessary to spend the money now," Biden told reporters. "The answer is 'yes,' it will be in the trillions of dollars, an entire package."
Positive vaccine data and expectations of a bigger fiscal package and infrastructure spending under a Democratic-led U.S. Congress have pushed the S&P 500 above 3,800 points for the first time, and set all three major indexes on track for weekly gains.
The Democrats are going to want to inject a lot of stimulus and spending into the economy, which in the near term will be good for economic growth, said Ross Mayfield, investment strategy analyst, at Baird.
"The market is pleased with the result," he said.
Some Wall Street analysts expect an equity pullback in the near-term as exuberance from unprecedented monetary and fiscal stimulus has led to a "frothy" market.
But a resumption in consumer spending, together with the restocking of business inventories as COVID-19 restrictions ease, should lift economic activity in 2021, said Jeff Schulze, investment strategist at ClearBridge Investments in a note.
Economy-linked financials, materials and industrials, which have outperformed their peers and scaled record levels this week, dropping more than 1% at one point during the session.
Market participants looked past a report that congressional Democrats plan to introduce articles of impeachment against U.S. President Donald Trump on Monday, after a violent crowd of his supporters stormed the U.S. Capitol on Wednesday.
The Dow Jones Industrial Average rose 56.84 points, or 0.18%, to 31,097.97. The S&P 500 gained 20.89 points, or 0.55%, to 3,824.68 and the Nasdaq Composite added 134.50 points, or 1.03%, to 13,201.98.
Volume on U.S. exchanges was 14.40 billion shares.
The S&P 500 closed above 3,800 points for the first time on Thursday, while the Dow and the Nasdaq posted their fourth straight weekly gains.
For the week, the S&P rose 1.83%, the Dow added 1.61% and the Nasdaq gained 2.43.%
Electric car-maker Tesla Inc jumped 7.8%, taking its market capitalization to more than $800 billion for the first time ever. Tesla was the largest percentage gainer on the S&P.
U.S.-listed shares of Baidu gained 15.6% on plans to form a company to make smart electric vehicles, according to two sources familiar with the matter. Baidu was the largest gainer on the Nasdaq 100.
Advancing issues outnumbered declining ones on the NYSE by a 1.10-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored advancers.
The S&P 500 posted 84 new 52-week highs and no new lows; the Nasdaq Composite recorded 309 new highs and five new lows. (Reporting by Herbert Lash, additional reporting by Devik Jain and Medha Singh in Bengaluru; Editing by Marguerita Choy)