WASHINGTON (AFP) - President Barack Obama on Tuesday staked his second term political capital on an ambitious bid to strengthen America at home by reigniting its economic engine, cutting gun murders and fixing immigration.

Focusing his State of the Union address squarely on domestic priorities, Obama referred only in passing to churning foreign policy crises, including North Korea's new nuclear test and Iran's unsolved nuclear brinkmanship.

He grasped for a note of optimism after years of frustration at a stop-start economic recovery, and praised Americans for steadfastness in rebounding from the financial earthquake rumbling when he took office four years ago.

"Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our union is stronger," Obama said, in a speech punctuated by raucous cheers in the House of Representatives.

The address was Obama's best chance to speak directly to Americans to sell plans endorsed by voters in November, and to stave off the domestic lame duck status that eventually constrains all second term presidents.

Divided Washington must fix its gaping budget deficit, Obama said, and described billions of dollars in automatic spending cuts due to crash into the economy on March 1 as "a really bad idea." "A growing economy that creates good, middle-class jobs - that must be the North Star that guides our efforts," Obama said, seeking to turn promises of a more equitable economy made in his election campaign into political reality.

"It is our generation's task, then, to reignite the true engine of America's economic growth - a rising, thriving middle class." Obama's message was unapologetically tailored to a domestic American audience, and those still enduring economic pain.

"He will be about revitalising the middle class and (easing) a sense of insecurity that has swept through much of the nation," said Princeton University professor Julian Zelizer.

Obama believes that restoring America's strength means pulling back from bloody and costly engagements abroad.

So he announced the return of 34,000 of the 66,000 US troops remaining in Afghanistan by next February, ahead of a full withdrawal in 2014.

In a brief diversion abroad, Obama said North Korea's nuclear test on Tuesday would only isolate the Stalinist state further, in neutral language perhaps penned to deprive Pyongyang of the attention it seeks.

He promised though to stand by America's Asian allies, "strengthen our own missile defence, and lead the world in taking firm action in response to these threats."

Arguing Al-Qaeda was a "shadow" of its former self, Obama pledged to help nations like Yemen, Libya, and Somalia provide for their own security, and help allies like France fighting extremists in Mali.

Breaking new ground, Obama also announced the start of formal talks between the US and Europe on a trans-Atlantic trade pact and previewed a new plan to thwart cyber attacks on US infrastructure.

Domestically, the president said he wanted a bill to reform the broken immigration system to give illegal immigrants a path to citizenship within months.

And he was at his most passionate when making a case to a tough audience in Congress for measures to stem gun violence, following the killings of 20 kids at a Connecticut elementary school in December.

"If you want to vote no, that's your choice," Obama told lawmakers.

"But these proposals deserve a vote.

"Because in the two months since Newtown, more than a thousand birthdays, graduations, and anniversaries have been stolen from our lives by a bullet from a gun."

Republicans were already manoeuvring to thwart Obama, after losing a tussle to the president late last year over rising taxes on the rich.

Rising Republican star Marco Rubio noted in excerpts of his official response to the president that the US economy shrank 0.1 per cent in the last quarter of 2012, and said Obama's spending plans would make it worse.

"I hope the president will abandon his obsession with raising taxes and instead work with us to achieve real growth in our economy," Rubio said.

Hitting campaign mode, Obama will travel to North Carolina, Georgia and his hometown of Chicago to sell his speech this week.