US stocks rose, sending the Standard & Poor's 500 Index to the highest level in two months, amid signs of progress in efforts by President Barack Obama and Republicans to reach agreement on a new budget.

The S&P 500 rallied 1.1 per cent to 1,446.73 at 4 p.m. in New York. The benchmark index has gained 15 per cent so far this year.

"There is certain optimism that it could potentially be done before the end of the year and that would be a very positive sign to the market," Philip Tasho, chief investment officer at Alexandria, Virginia-based Tamro Capital Partners LLC, which manages about $US1.8 billion, said in a phone interview. "Once the solutions are in the rear view mirror in terms of fiscal policy, we will simply look forward. It's a blip in the long-term trend."

The S&P 500 sank as much as 7.7 per cent from its 2012 high in September as Obama's re-election set up a budget showdown with the Republican-controlled House of Representatives. The benchmark gauge has climbed 6.9 per cent since its November low amid optimism a compromise will be reached to avoid more than $US600 billion in automatic tax increases and spending cuts.

Revised Plan

Obama lowered his tax revenue demand by $US200 billion and offered to start tax rate increases at $US400,000 in income instead of $US250,000, moving closer to a budget deal with House Speaker John Boehner.

The president's revised plan would raise $US1.2 trillion in taxes in the next decade and cut $US1.22 trillion in spending, said a person familiar with the talks. Obama wants a large enough debt ceiling increase for the next two years and would accept a new inflation yardstick that would reduce Social Security cost-of-living increases, said the person, who sought anonymity.

Boehner said he will push a budget "plan B" measure that will include tax increases on income of more than $US1 million a year, while he continues to negotiate with the president. Obama's administration and other Democrats immediately rejected the proposal as inadequate.

"People have been very fearful to move into stocks and this might be one of the things to get them go back to stocks," Brian Gendreau, a market strategist at El Segundo, California- based Cetera Financial Group Inc., said in a telephone interview. The firm has about $US20 billion in assets under management. "We see a pickup in housing. The consumer continues to spend. The recovery is there, it's real."