U.S. stocks rose, with technology and financial shares leading a rebound from the biggest drop in two months, amid optimism that progress is being made in Greece's debt talks.

"The Germans have officially blinked and off we go," said Michael Block, chief equity strategist at Rhino Trading Partners LLC in New York. "U.S. data has been better in general, but more people are coming around to the fact the Fed is seeing all this volatility in the bond market and is afraid to raise rates, there isn't too much tumult, oil has stabilized and so we move on."

Optimism toward a potential Greek deal with its creditors rose as people familiar with Germany's position said Chancellor Angela Merkel's government may be satisfied with Greece committing to at least one economic reform sought by creditors to open the door to bailout funds. The European Central Bank was also said to have raised the level of emergency cash available to Greek banks.

The S&P 500 fell on Monday to a two-month low before edging higher yesterday. The index had tumbled 2.4 percent from its May record amid concern the Federal Reserve will raise interest rates as early as September.

The benchmark this year has traded in its tightest weekly range since the mid-'90s, signaling investor uncertainty as to whether the economic recovery is strong enough to withstand a rate increase. Reports on retail sales and jobless claims Thursday may offer further clues.

"Incoming data will provide more evidence week by week that the world economy is not in a fragile state as some suspected in the first quarter," said William Hobbs, head of investment strategy at Barclays Plc's wealth-management unit in London. "Data seems to be pointing a bit upwards and that may be suggesting to some that revenue prospects for the U.S. corporate sector may get better than what was priced in."