US STOCKS-Wall St rallies as political hurdles fade

* Republicans unveil plan to raise U.S. debt limit

* CBOE Volatility index plunges, near pre government shutdown levels

* U.S. jobless claims at 6-month high but bullish trend continues

* Indexes up: Dow 1.6 pct, S&P 1.7 pct, Nasdaq 1.9 pct

By Rodrigo Campos

NEW YORK, Oct (KOSDAQ: 039200.KQ - news) 10 (Reuters) - U.S. stocks rallied on Thursday, with the S&P 500 posting its largest gain in more than nine months on signs of progress in negotiations to raise the U.S. debt limit a week before a deadline.

Despite its massive move, the S&P 500 hit technical resistance at its 14-day moving average, indicating that some concern lingered among investors.

The current Republican proposal would push off the threat of a U.S. default from Oct. 17 until possibly the middle or end of November. The Federal Government remains in a partial shutdown.

Ahead of a meeting with President Barack Obama, Republicans moved to break a standoff of their own making. The move was a significant shift for Republicans, who had hoped to use the disruption to extract more concessions on spending from Democrats and defund a healthcare law.

"Now we just wait, move up and down one percentage point and trade specific stocks on earnings until we get some kind of definitive outcome from Washington," said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.

"Today is reversing excess fear. I think the 14 day (moving average) may actually be a difficult resistance level to break."

The Dow Jones industrial average rose 233.69 points or 1.58 percent, to 15,036.67, the S&P 500 gained 27.44 points or 1.66 percent, to 1,683.84 and the Nasdaq Composite added 71.4 points or 1.94 percent, to 3,749.176.

The S&P was on track to post its largest daily percentage gain since Jan. 2, when yet another market pullback was reversed after politicians reached an agreement regarding the so-called fiscal cliff.

The CBOE Volatility index VIX, often used to measure the level of investor anxiety, plunged nearly 14 percent to 16.87, near the level it was prior to the U.S. government shutdown.

In one of the few economic indicators that continues to be published amid the federal government partial shutdown, data showed the number of Americans filing new claims for jobless aid touched a six-month high last week. A computer-related backlog of claims was processed and the partial government shutdown hit some non-federal workers.

This year's high-flying tech stocks - such as Facebook , up 4.6 percent to $48.93 - rebounded after several days of declines. Best Buy and Netflix (NasdaqGS: NFLX - news) , the year's best performers on the S&P 500 and leaders in the recent decline, were up 7.1 percent and 5.3 percent respectively.

Citrix Systems Inc (NasdaqGS: CTXS - news) shares were off 11.3 percent at $59.12 after the cloud computing software maker estimated quarterly results below analysts' expectations as businesses delayed contracts.

About 96 percent of the S&P 500 components were posting gains.