NEW YORK (AFP) - Technology and banking shares were among the big winners on Tuesday as US stocks powered higher behind greater confidence in the US economic outlook.

Investors had been troubled by the prospects of a Federal Reserve interest rate increase, but "now they're starting to embrace it," said Charlie Bilello of Pension Partners. "It means the economy is doing a bit better."

Sentiment was further boosted by Commerce Department data that showed US new-home sales in April surged to their best level since January 2008 despite a hefty rise in median prices.

The Dow Jones Industrial Average advanced 1.2 per cent to 17,706.05.

The broad-based S&P 500 gained 1.4 per cent to 2,076.06, while the tech-rich Nasdaq Composite Index jumped 2 per cent to 4,861.06.

Analysts said US stocks also benefited from positive momentum in Europe, where equities rallied strongly in part due to polls showing Britain was more likely to vote in favour of staying in the European Union.

Apple rose 1.5 per cent, while Microsoft jumped 3.1 per cent. JPMorgan Chase and Citigroup both advanced 1.7 per cent.

Agricultural giant Monsanto climbed 3.1 per cent after it rejected a US$62 billion (S$85 billion) takeover bid by Germany's Bayer AG as too low, but said it was willing to entertain further talks on a merger.

Electronics retailer Best Buy sank 7.4 per cent as it projected lower international revenues and per-share earnings in the second quarter compared with the year-ago period. Analysts said the forecast was weaker than expected.

RBC Capital said enthusiasm for Best Buy was also dampened by its announcement of the impending retirement of respected chief financial officer, Sharon McCollam, which was expected. "It's hard for us to imagine this isn't a negative for Best Buy," RBC said.

Toll Brothers, a homebuilder specialising in luxury properties, jumped 8.7 per cent after reporting second-quarter net income rose 31.2 per cent to US$89.1 million.