After several rounds of talks, President Joe Biden and top congressional Republican Kevin McCarthy were closing in on a deal to increase the government's $31.4 trillion debt limit for two years, while capping spending on most items, a U.S. official told Reuters.

McCarthy reinforced on Friday that negotiations, which will continue virtually during the day, had made progress on Thursday.

The Dow Jones Industrial Average was set to snap a five-day losing streak, while the Nasdaq touched its highest level since mid-August earlier in the session.

"The market is reacting really well to an anticipated deal and it looks like the framework for deal is getting close to being in place and we're getting a bit of a relief rally," said David Sadkin, president at Bel Air Investment Advisors.

Still, the S&P 500 index and the Dow were on course for weekly losses, pressured by prolonged debt ceiling talks in the face of the June 1 deadline.

The S&P 500 technology sector jumped 2.2%, with chip companies leading the advance. The Philadelphia SE Semiconductor index had climbed 4.8% by afternoon and was on course for its best two-week performance since April 2020.

Chipmaker Marvell Technology Inc. jumped 27.7% after it forecast its annual artificial intelligence (AI) revenue would double.

This comes just as shares of the world's most valuable chipmaker, Nvidia Corp, hit a record high on Thursday after its bumper forecast. Nvidia shares were up 1.8%.

At 12:07 p.m. ET the Dow Jones Industrial Average was up 298.77 points, or 0.91%, at 33,063.42, the S&P 500 was up 47.65 points, or 1.15%, at 4,198.93 and the Nasdaq Composite was up 246.83 points, or 1.94%, at 12,944.93.

Data showed U.S. consumer spending increased more than expected in April and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month.

"We still have inflation, we still have higher interest rates and that will continue to be an overhang for the market until the Federal Reserve goes on the sidelines," Sadkin added.

Traders now see a more than 60% chance of a 25-basis-point hike by the Fed in its June policy meet, up from about 40% before the data.

Ford Motor Co gained 7.0% on signing a deal allowing its customers to access more than 12,000 Tesla Inc Superchargers in North America in early 2024. Tesla jumped 5.3%.

Ulta Beauty Inc dropped 12.0% after the cosmetics retailer cut its annual operating margin forecast.

Paramount Global added 6.3% after the media conglomerate's controlling shareholder National Amusements received a $125 million investment.

Advancing issues outnumbered decliners by a 2.05-to-1 ratio on the NYSE and by a 1.70-to-1 ratio on the Nasdaq.

The S&P index recorded 15 new 52-week highs and 14 new lows, while the Nasdaq recorded 55 new highs and 84 new lows.