* S&P 500 inches closer to all-time intraday high
* Healthcare stocks rally, Humana among S&P's top percentagegainers
* Indexes up: Dow 0.6 pct, S&P 0.5 pct, Nasdaq 0.5 pct
By Caroline Valetkevitch
NEW YORK, April 2 (Reuters) - U.S. stocks rose on Tuesday,led by the health care sector after a government decision onpayment rates, while factory orders data confirmed the economyis steadily improving.
The S&P 500 closed at another record high, though it fellshort of breaking above its all-time intraday high of 1,576.09.The Dow also ended at another record high.
The U.S. government dropped plans to cut payments forprivate Medicare Advantage insurers and instead said it wouldallow a 3.3 percent raise.
The news boosted shares of some health insurers, including Humana, which derives about two-thirds of its revenuefrom Medicare Advantage business. The stock jumped 5.5 percentto $79.11 and was among the biggest percentage gainers on theS&P 500. UnitedHealth Group gained 4.7 percent to$61.74.
"They didn't expect the result that they got. That will helpwith their bottom line," said Quincy Krosby, market strategistat Prudential Financial in Newark, New Jersey.
Strengthening U.S. data has helped stocks rally since thestart of the year. On Tuesday, U.S. data showed February factoryorders rose 3 percent, slightly above expectations. That followsa weak reading on U.S. manufacturing on Monday that sparked apullback in stocks.
The S&P 500 is now up 10.1 percent since the start of theyear.
For the day, the Dow Jones industrial average was up89.16 points, or 0.61 percent, at 14,662.01. The Standard &Poor's 500 Index was up 8.08 points, or 0.52 percent, at1,570.25. The Nasdaq Composite Index was up 15.69points, or 0.48 percent, at 3,254.86.
The S&P 500 surpassed its 2007 closing high last Thursday,while the Dow first broke above its 2007 record on March 5.
Stocks pared gains late in the session, giving investorsanother reason to question the strength of the recent rally.
"The recent legs of this rally have lacked a bit ofconviction," said Mark Luschini, chief investment strategist atJanney Montgomery Scott in Philadelphia. "What's been leadingequity markets has been more defensive sectors."
Healthcare sector stocks are still seen as cheap relativeto the overall market. Humana, which has a market cap of about$11.9 billion, has a forward price-to-earnings ratio of 9.4,below the S&P 500 P/E average ratio of about 16.5. UnitedHealthhas a P/E ratio of 10.6 and Cigna has a P/E ratio of 9.7.
"We do think that healthcare stocks are a nice combinationof dividend yields, growth and low valuations and we are veryconstructive on the sector," said Jim Russell, senior equitystrategist for U.S. Bank Wealth Management in Cincinnati.
Other big gainers in the healthcare sector included sharesof Cigna, up 2.9 percent at $64.75.
Most investors expect moves to be limited this week beforeFriday's U.S. monthly payrolls report.
The March jobs report could give clues on how successful theFederal Reserve has been in lowering unemployment, one of theprimary headwinds for the economy.
About 200,000 jobs were created last month, according to aReuters poll, down from 236,000 in February. The unemploymentrate is expected to come in at 7.7 percent, unchanged from theprevious period, the poll showed.
In an effort to bring down the unemployment rate, the Fedhas maintained an accommodative monetary policy, which has alsobenefited stocks.
Other gainers included Hertz Global Holdings shares,up 6.8 percent to $23.41, after the company forecast strongearnings and revenue through 2015 due to increasing globaldemand for car rentals and benefits from its recently completedacquisition of Dollar Thrifty.
Among decliners, Delta Airlines Inc shares were off8.1 percent at $14.94. Delta's unit revenue for March rose at aslower pace than in the prior two months.
Shares of Nasdaq OMX Group Inc plunged 12.8 percentto $27.91 after agreeing to buy a BGC Partners Inc. trading platform. BGC shares were up 48.6 percent at $5.72.
Shares of Hewlett-Packard fell 5.2 percent to $22.10after Goldman Sachs downgraded them to "sell."
Volume was roughly 5.9 billion shares traded on the New YorkStock Exchange, the Nasdaq and the NYSE MKT, below the 2012average daily closing volume of about 6.45 billion.
Decliners outpaced advancers on the NYSE by about 15 to 14and on the Nasdaq by about 13 to 10.
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