(Adds midday U.S. market updates) * Stocks give back early trading gains but remain up midday * Analyst sees Delta variant worries as likely exaggerated BOSTON, Aug 2 (Reuters) - U.S. stocks edged higher on Monday on optimism over government infrastructure spending and corporate earnings, even as oil prices slumped on broader macroeconomic fear and the spread of the delta variant of the coronavirus continued. U.S. senators on Sunday unveiled a bipartisan plan to invest around $1 trillion in roads, bridges, ports, high-speed internet and other infrastructure, with some predicting the spending bill, the largest in decades, could pass as early as this week. A rebound in corporate profits and the recent drop in bond yields are also bolstering the case for owning stocks, even as markets stand near records and economic growth is expected to slow. Those factors helped push the S&P 500 index to a near all-time high on Monday morning, although the benchmark basket retreated slightly to gain 6.44 points, or 0.15%, to 4,401.7 by early afternoon. The Dow Jones Industrial Average rose 39.77 points, or 0.11%, to 34,975.24, and the Nasdaq Composite added 51.59 points, or 0.35%, to 14,724.27. The MSCI world equity index, which tracks shares in 49 countries, gained 0.47%. “Constructive news last week on Delta and growth trims downside risks,” JPMorgan market strategists wrote in a note on Monday. The bank’s outlook cited a surprise decline in British and European COVID-19 cases and recent data supporting the view that “growth boomed in the U.S. for another quarter and rebounded strongly in Europe.” At the same time, oil prices tumbled about 4% on Monday as weak economic data from China and the United States, the world’s top oil consumers, and higher crude output from OPEC producers stoked fears of weakness in oil demand and oversupply. U.S. crude recently fell 4.33% to $70.75 per barrel and Brent was at $72.50, down 3.86% on the day. U.S. manufacturing continued to grow in July, though the pace slowed for the second straight month as spending rotates back to services from goods and shortages of raw materials persist. Factories around the world are suffering from supply bottlenecks, which sent prices skyrocketing in July, while a new wave of coronavirus infections in Asia demonstrated the fragile nature of the global recovery. Treasuries Benchmark 10-year notes last rose 25/32 in price to yield 1.1574%, from 1.239% late on Friday, continuing a multi-month decline. Negatively interpreting lower Treasury yields, however, could be a mistake, according to Morgan Stanley strategist Guneet Dhingra. “Investors are fitting a narrative of excessive pessimism to lower yields,” Dhingra wrote in a note on Sunday, noting low hospitalizations in Britain from the Delta variant, “suggesting overstated downside risks from COVID-19.” The dollar fell back toward the one-month lows hit last week when it became clear the Fed was in no hurry to tighten policy. As of midday Monday, the dollar index fell 0.049%, with the euro down 0.02% to $1.1868. Gold prices climbed only modestly on Monday as an uptick in risk appetite took some shine off the safe-haven metal. Spot gold added 0.1% to $1,815.69 an ounce. U.S. gold futures gained 0.12% to $1,814.80 an ounce. Reporting by Lawrence Delevingne; Editing by Steve Orlofsky and Will Dunham Our Standards: The Thomson Reuters Trust Principles.