(Updates with afternoon trading)

* Weekly jobless claims fall amid stable labor market

conditions

* Micron jumps after US investment plan boost

* S&P 500 +0.84%, Nasdaq +1.26%, Dow +0.40%

By Noel Randewich and Ragini Mathur

July 9 (Reuters) - Wall Street climbed on Thursday, as

Micron Technology ( MU ) fueled a rally in chip stocks that eclipsed

fears that renewed U.S. and Iranian attacks might prolong the

Middle East conflict and fuel inflation.

Tehran said it hit U.S. military targets in Kuwait, Qatar and

Bahrain following U.S. strikes against Iran on Wednesday.

The PHLX chip index surged 4.6%, on track for a second

straight positive session.

Micron Technology ( MU ) jumped 7.5% after laying out plans to

invest more than $250 billion in the U.S. through 2035, to

benefit from demand for memory chips to supply the boom in

artificial intelligence.

Applied Materials ( AMAT ) gained 5% and Sandisk ( SNDK ) surged

12%.

AI-related stocks have been volatile lately as investors

worried about the sustainability of a rally that has helped Wall

Street reach record levels in 2026.

"This is still very much an AI bull market. For a bit, it was

starting to broaden out, but that's contingent on oil prices and

interest rates staying anchored, and with this flare-up in the

Middle East, that calls that part of the bull market into

question," said Ross Mayfield, investment strategy analyst at

Baird in Louisville, Kentucky.

Meta Platforms ( META ) rose 1.4% after Reuters reported that

the company plans to manufacture AI chips starting in September.

IBM ( IBM ) fell 2.7% and Microsoft ( MSFT ) dipped 0.7%.

Bloomberg reported Starbucks ( SBUX ) had tapped AI to reduce

its reliance on both companies.

The S&P 500 was up 0.84% at 7,545.53 points. The Nasdaq gained

1.26% to 26,196.22 points, while the Dow Jones Industrial

Average was up 0.40% at 52,559.45 points.

Six of the 11 S&P 500 sector indexes rose, led by information

technology, up 1.91%, followed by a 1.1% gain in

financials.

With quarterly reporting season set to get under way, analysts

on average expect S&P 500 earnings to increase 24%

year-over-year, with technology companies accounting for much of

that increase, according to LSEG I/B/E/S.

The S&P 500 is trading at about 20 times expected earnings,

down from 21 a month ago.

The number of Americans filing claims for unemployment benefits

fell last week, suggesting the labor market remained stable

despite a slowdown in job growth in June.

The Federal Reserve kept interest rates unchanged at its June

meeting, under new Chair Kevin Warsh, but minutes released on

Wednesday showed a few policymakers saw a case for raising

borrowing costs before ultimately agreeing to hold steady.

Traders are pricing in a likely 25-basis-point rate hike by the

Fed's December meeting, according to CME's FedWatch tool.

PepsiCo ( PEP ) fell 3% despite the snacks and soda giant

beating second-quarter revenue estimates.

Costco Wholesale's ( COST ) shares were down 4.4% to a six-month

low after the retailer reported decelerating comparable sales

for June.

Advancing issues outnumbered falling ones within the S&P 500

by a 1.6-to-one ratio.