US stocks rose sharply on Wednesday, fueled by optimism over a potential deal on the US$31.4 trillion federal debt ceiling and as a rebound in regional bank shares eased concerns about an escalation in the sector's troubles.

President Joe Biden and top US congressional Republican Kevin McCarthy on Wednesday reiterated their determination to strike a deal soon to raise the debt ceiling and avoid an economically catastrophic default.

If an agreement is not reached by June 1, the US Treasury has said it could begin to run out of funds to pay the government's bills, potentially igniting a recession.

A jump in regional bank shares lifted sentiment, led by a 10.19 percent surge in Western Alliance Bancorp a day after the bank said deposits grew by more than US$2 billion in the quarter ended May 12.

The KBW regional bank shot up 7.28 percent to notch its biggest one-day percentage gain since January 6, 2021 to close at its highest level since May 1.

"It is optimism over the debt ceiling. It is continued optimism the banking crisis is in the rear-view mirror. Every day we go without a new problem, the closer we get to maybe putting it behind us," said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

The Dow Jones Industrial Average rose 1.24 percent, to 33,421; the S&P 500 gained 1.19 percent, to 4,159; and the Nasdaq Composite added 1.28 percent, at 12,501.

The gains marked the biggest one-day percentage climb for each of the three major indexes since May 5.

Also providing support was a 4.41 percent advance in Tesla shares after its annual shareholder meeting on Tuesday.

Top boss Elon Musk downplayed market speculation he may step down as CEO of Tesla, touched upon two new mass-market models the company is developing, and reaffirmed that deliveries of its long-delayed Cybertruck pickup would start this year. (Reuters)