Copper, oil and gold touched multiyear highs before retreating as the dollar rose.

US government bonds dropped as the tax deal is seen as a stimulus for the economy, benefiting stocks, commodities and other risky assets.

The euro had risen on optimism that Ireland's lawmakers will pass the toughest budget ever. But tension persisted, pressuring the single currency after euro zone ministers said they would take no new measures to prevent debt problems from spreading.

Greece and Ireland have received official bailouts, but the fear is Portugal and perhaps Spain and Italy could be hit by debt contagion.

"If the Irish pass an austerity budget, it alleviates some political uncertainty, but EU finance ministers provided no signals for additional steps to help stabilize European credit markets," said Omer Esiner of Commonwealth Foreign Exchange in Washington.

"It looks like we're back to the status quo, which means sell the euro on contagion fears." He said a pullback in stocks and commodities also contributed to "a heavier tone for risk assets in general."

The Dow Jones Industrial Average was up 47.41 points, or 0.42 percent, at 11,409.60. The Standard & Poor's 500 Index was up 5.99 points, or 0.49 percent, at 1,229.11, after touching a new 2010 intraday high at 1,234.83.

The Nasdaq Composite Index was up 15.70 points, or 0.61 percent, at 2,610.62.

Global stocks measured by MSCI All-Country World Index rose 0.49 percent.

Europe's FTSEurofirst 300 index of top shares hit a four-week high to close up 0.9 percent on economic recovery hopes after the possible compromise on Bush-era US tax cuts, while mining company shares rose on demand expectations.

US President Barack Obama unveiled a deal late on Monday to renew tax cuts for the middle class as well as for wealthy Americans, a concession to Republicans. Some Democrats balked at major components of a possible compromise bill, but talks will continue in coming days.

The euro surrendered some of its gains to move 0.1 percent higher at $1.3317 as euro zone policymakers failed to agree on new policies to tackle the region's debt crisis.

The dollar was up at 83.140 yen after slipping to a three-week low against the Japanese currency earlier in the session. The renewed strength in the yen dragged Japan's Nikkei 225 down 0.3 percent.

The dollar was slightly up against a basket of major currencies, with the US Dollar Index up 0.13 percent at 79.671 as the news to possibly extend the Bush tax cuts in the United States was seen by investors as dollar-negative.

While the plan could accelerate US growth, it is funded through debt and expected to add significantly to the budget deficit, thus would be another weight on the dollar.

Euro zone policymakers have yet to show financial markets that they can decisively resolve the region's debt problem.

After a five-hour meeting, the bloc's finance ministers said late on Monday they would be taking no new steps to tackle the contagion, saying an existing emergency fund was sufficiently big and that a proposal to issue euro zone bonds had not even been broached.

German Chancellor Angela Merkel, speaking in Berlin, rebuffed calls for a bigger financial safety net or joint euro bonds.

Commodities, meanwhile, shed gains after touching multiyear or record highs as macroeconomic factors and a firmer euro boosted prices.

Copper rallied to a record high above $9,000 a ton before easing to $8,870 on rising demand expectations for 2011 against a backdrop of tight supply and a softer dollar.

Spot gold prices fell $15.25, or 1.08 percent, to $1407.08 after touching a record high at $1,430.95 an ounce.

US government bond prices stumbled as the proposed extension of tax cuts raised concerns over inflation and the federal government's ability to meet its long-term debt burden.

The benchmark 10-year US Treasury note was down 43/32, with the yield at 3.0899 percent. The 2-year US Treasury note was down 5/32, with the yield at 0.5079 percent. The 30-year US Treasury bond was down 64/32, with the yield at 4.3579 percent.