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The S&P 500 stock index, after suffering its worst monthly performance since May 2012 in August, is up 3.1% so far this month is currently on its longest daily winning streak since early July.
Stocks on major markets also advanced with MSCI's world index, which tracks 45 equities markets, up 0.99%, chalking up its longest run of daily gains since December.
Syria accepted a Russian proposal on Tuesday to give up chemical weapons and major western powers began working on a United Nations resolution to create a process for ensuring it happens, but the United States and its allies remained skeptical and President Barack Obama kept the pressure on Syria by seeking congressional backing for a possible military strike while exploring a diplomatic alternative.
"The sense that we might avoid a strike or 'boots on the ground' in Syria created a relief rally," said Greg Peterson, director of investment research at Ballentine Partners in Waltham, Massachusetts.
The Dow Jones industrial average rose 127.94 points or 0.85%, to 15,191.06 and the S&P 500 gained 12.28 points or 0.73%, to 1,683.99. The Nasdaq Composite added 22.83 points or 0.62%, to 3,729.021.
US Treasury debt by contrast fell in price. Benchmark 10-year notes fell 13/32 with their yields rose to 2.97%.
"Bonds sold off because people don't need the perceived safe-haven," Peterson said.
German government safe-haven bonds and gold and other precious metals also backpedaled.
Oil pulled back with US crude off 2.1% to just above $107 a barrel. Crude prices rose 2.7% last week on worry a strike against Syria could spark a wider conflict and jeopardize supply.
News of stronger-than-expected industrial output and retail sales in China, added to signs that the world's second-largest economy was stabilizing after slowing for two years and helped to bolster global equity markets as well.
A 1.26% jump in European shares followed a three-month high for Asian stocks.
"The US economy is a little weaker than desired, but the recovery theme remains in place. Data from China this week show China might be recovering. If the No. 1 and No. 2 economies in the world are recovering, that favors riskier assets," he said.
MSCI's broadest index of Asia-Pacific shares outside Japan ended at its highest since early June as it extended its gains for the week to 2.5%, while Tokyo's Nikkei closed 1.5% higher.
Enthusiasm for hard-hit emerging markets continued to revive after last week's weaker-than-expected US jobs data muted expectations about how fast the Federal Reserve would scale back its stimulus policy.
A Reuters poll on Monday showed economists generally expect the Fed to announce a reduction in its $85 billion monthly bond-buying program by just $10 billion.
The MSCI emerging equities index was at a three-month high as the day's 1.7% rise took its rally over the last nine trading sessions to almost 9.0%.
The cooling Middle East tensions and the better China data helped the US dollar shake off some of its recent sluggishness and the euro sidestep some weaker-than-expected French output figures.
The dollar climbed to an almost seven-week peak against the yen on Tuesday as easing tensions over Syria and encouraging economic data from China eroded demand for the safe-haven Japanese currency.
The yen also weakened to a 3-1/2-month low against the euro, while the higher-yielding Australian and New Zealand dollars gained on rising investor appetite for risk.
The dollar was up 0.7% at 100.31 yen after climbing to 100.45 yen, according to Reuters data, the strongest since July 25.
The euro was up 0.9% to 133.08 yen, having reached 133.29 yen, the highest since late May.
The yen also weakened after minutes of the Bank of Japan's August policy meeting released on Tuesday showed members were confident that the central bank's aggressive monetary stimulus was helping lead to an economic recovery.
The US Treasury sold $31 billion in three-year notes. It will sell 10-year notes on Wednesday and 30-year bonds on Thursday.
Record corporate bond deal
Hedging by dealers and investors preparing for the bond issue by telecommunications group Verizon
In a bid to raise money to finance the $130 billion buyout of its wireless operations, Verizon Communications stuck with plans to offer investors lucrative coupons.
Verizon Communications' deal received more than $85 billion of high quality orders for the bond issue on Tuesday.
"Thoughts among market participants is that it could now be possibly $40 billion or more because it's such a strong order book," said Matt Duch, senior portfolio manager at Calvert Investment Management.
The overwhelming response to the offering follows Verizon's decision to offer bargain basement prices for the notes, to ensure it raises the bulk of the $49 billion of multi-currency bonds it needs to help pay Vodafone for its 45% stake in Verizon Wireless.
