* Indexes: Dow up 0.76%, S&P 500 up 0.51%, Nasdaq up 0.27%

* U.S. equity funds record first weekly outflow in three

weeks

* SpaceX surges after public debut, set for $2 trln in

market cap

* Space stocks slide after rallying ahead of SpaceX debut

* Adobe drops after exit of CFO Dan Durn

(Updates prices throughout; adds remarks from Iran and analyst

comment)

By Johann M Cherian and Twesha Dikshit

June 12 (Reuters) - The benchmark S&P 500 and the blue-chip

Dow rose in choppy trading on Friday, aided by expectations for

an imminent end to the Middle East conflict, while SpaceX shares

surged in their debut, making it Wall Street's biggest public

listing in history.

Iran said that an "Islamabad Memorandum of Understanding"

for addressing the conflict had "never been closer", which aided

risk sentiment broadly, a day after U.S. President Donald Trump

said a deal was close.

The spotlight was on SpaceX. Its shares rose 22% to

$163, well above the IPO price of $135 apiece, valuing the

company at more than $2 trillion.

SpaceX is now ranked among the biggest publicly listed U.S.

companies.

On the other hand, shares of Tesla, Musk's other

company that also trades at a premium to its earnings, fell 2%.

Only about 3% to 4% of SpaceX's shares are expected to be

available for trading, with a large allocation to retail

investors.

"The fact that the IPO opened and traded smoothly is

important because the market was watching this less as a pure

SpaceX event and more as a test of whether investors could

absorb very large AI/space-linked supply without creating stress

elsewhere," said Chris Murphy, co-head of derivatives strategy

at Susquehanna.

IPOs of AI companies OpenAI and Anthropic are also highly

anticipated later in the year.

Shares of other space stocks, which have soared in the

lead-up to the debut, eased on Friday. Rocket Lab ( RKLB ) fell

9.1%, Intuitive Machines ( LUNR ) and Planet Labs shed

13.4% and 10.2%, respectively, while funds holding shares of

SpaceX such as Fundrise Innovation Fund rose 3.3%.

Nine of 11 major S&P 500 sectors moved higher, with energy

leading gains. It rose 1.7%.

Chip stocks were volatile, with Nvidia ( NVDA ) flat, while

Advanced Micro Devices ( AMD ) added 5% after Citigroup raised

its rating to "buy" from "neutral". Megacaps such as Amazon.com ( AMZN )

and Apple ( AAPL ) slipped 2% and 1.4%, respectively.

U.S. equity funds saw their first weekly outflow in three,

and earlier this week the technology index confirmed a

correction. Analysts believe some of the weakness in U.S. stocks

and bitcoin's 16% fall last week could be due to traders

trimming holdings ahead of SpaceX's debut.

At 12:15 p.m. ET, the Dow Jones Industrial Average

rose 385.41 points, or 0.76%, to 51,234.16, the S&P 500

gained 37.70 points, or 0.51%, to 7,432.00 and the Nasdaq

Composite gained 71.59 points, or 0.27%, to 25,881.25.

The three main U.S. stock indexes are set for small weekly

gains, amid uncertainty surrounding the Iran conflict and

concerns that a rally in AI stocks has gone too far.

SpaceX, which also includes Starlink and xAI, has already

defied some Wall Street conventions. Index providers such as

Nasdaq and FTSE Russell have tweaked their entry requirements

for its inclusion, while the company also set its stock price at

$135, even before the roadshow began, reflecting Musk's sway

over the IPO.

Some analysts have, however, voiced caution over the

fundamentals of the company, which posted more than $4 billion

in annual losses last year.

On the macro front, a survey showed that consumer sentiment

fared better than expected this month, while data earlier this

week showed inflation pressures were mounting.

However, following Trump's remarks on Thursday, traders

pushed their expectations for an interest rate hike by the

Federal Reserve to December from October earlier this week, the

CME Group's FedWatch tool showed.

Adobe slid 6.8% after the exit of CFO Dan Durn.

Advancing issues outnumbered decliners by a 2.18-to-1 ratio

on the NYSE, and by a 1.48-to-1 ratio on the Nasdaq.

The S&P 500 posted 35 new 52-week highs and 10 new lows,

while the Nasdaq Composite recorded 166 new highs and 73 new

lows.