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* S&P 500 less than 0.5 percent away from all-time high
* Healthcare stocks rally, Humana is S&P's top gainer
* Indexes up: Dow 0.6 pct, S&P 0.6 pct, Nasdaq 0.7 pct
By Angela Moon
NEW YORK, April 2 (Reuters) - U.S. stocks rose on Tuesday, pushing the S&P 500 within striking distance of its all-time intraday high, as healthcare stocks surged after a government decision raised prospects of higher profits.
The group gained after the U.S. government dropped plans to cut payments for private Medicare Advantage insurers and instead said it would raise them by 3.3 percent.
Humana, which derives about two-thirds of its revenue from Medicare Advantage business, rose 7 percent to $80.11. UnitedHealth Group rose 6.2 percent to $62.67, and Cigna Corp was up 4.1 percent to $65.49.
Despite the gains, stocks in the healthcare sector are still seen as cheaper than 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. UnitedHealth has 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 combination of dividend yields, growth and low valuations and we are very constructive on the sector," said Jim Russell, senior equity strategist for U.S. Bank Wealth Management in Cincinnati.
The broad market's rise countered Monday's sell-off. Most investors expect moves to be limited this week before Friday's U.S. monthly payrolls report.
In an effort to bring down the unemployment rate, the Federal Reserve has maintained an accommodative monetary policy, which has also benefited stocks.
"Good numbers are good and bad numbers are good because it keeps the Fed at the side of the market," said Burt White, managing director and chief investment officer at LPL Financial in Boston.
"The market continues to move higher, driven by the premise of stimulus."
The March payrolls survey could give clues on how successful the Fed has been in lowering unemployment, one of the primary headwinds for the economy. About 200,000 jobs were created last month, according to a Reuters poll, down from 236,000 in February.
The S&P index last week set an all-time closing high but has thus far been unable to reach its intraday record of 1,576.09, an important level that analysts say could draw in more investors. Intraday sessions have been volatile, with stocks dropping sharply on Monday before rebounding.
The Dow Jones industrial average was up 85.94 points, or 0.59 percent, at 14,658.79. The Standard & Poor's 500 Index was up 8.79 points, or 0.56 percent, at 1,570.96. The Nasdaq Composite Index was up 22.95 points, or 0.71 percent, at 3,262.12.
"We've not had two consecutive up or down days in 10 sessions, and that is a good sign of a trend reversal," White said.
Investors mostly shrugged off Tuesday's data. February factory orders rose 3 percent, slightly above expectations.
The Institute for Supply Management-New York's March index of regional business activity came in at 573.3, slightly higher than last month's 572.7.
A weak reading on U.S. manufacturing sparked Monday's decline, although other recent indicators pointed to a strengthening economy and helped Dow and S&P to record highs last week.
The S&P is up 10 percent so far this year, and while investors view market momentum as positive, many are also calling for a pullback given the size and swiftness of recent gains.
Among decliners, Delta Airlines Inc shares were off 7 percent at $15.11. Delta's unit revenue for March rose 2 percent from a year earlier, but was below its forecast due to lower-than-expected demand, temporary inefficiencies during implementation of new technology and lower close-in bookings driven by the sequester.
But Hertz Global Holdings shares rose 7.3 percent to $23.50 after the company forecast strong earnings and revenue through 2015 due to increasing global demand for car rentals and benefits from its recently completed acquisition of Dollar Thrifty.