* Apple rises after Icahn comments
* Endo down after agreeing to buy Par Pharmaceutical
* Altera rallies on Intel M&A report
* Indexes up: Dow 0.2 pct, S&P 0.3 pct, Nasdaq 0.6 pct (Updates to mid-afternoon)
By Noel Randewich
May 18 (Reuters) - The Dow Jones industrial average and S&P 500 hit record highs on Monday, helped by a rally in Apple as well as weak economic data suggesting the Federal Reserve may wait to raise interest rates.
The Dow touched an intraday high of 18,311.09, surpassing its previous record set in early March, while the S&P 500 touched 2,129.51, climbing past the high it hit last week.
U.S. homebuilder sentiment fell in May although most builders view market conditions as favorable, the National Association of Home Builders said on Monday.
The U.S. economy is not rebounding strongly enough for the Federal Reserve to raise interest rates before September, many investors believe.
"It's becoming more of the collective thought that the Fed can wait because you really don't see any blistering growth," said Kurt Brunner, a portfolio manager at Swarthmore Group in Philadelphia.
Apple's shares rose 1.39 percent to $130.57 after billionaire investor Carl Icahn said the stock was "still dramatically undervalued" and that it should be trading at $240.
The stock's rise was the biggest factor for the rise in all the three major indexes.
Seven of the 10 major S&P 500 sectors were higher, with the health index's 0.68 percent gain leading the way.
At 1:57 p.m., the Dow Jones industrial average rose 37.4 points, or 0.2 percent, to 18,309.96, the S&P 500 gained 6.58 points, or 0.31 percent, to 2,129.31 and the Nasdaq Composite added 29.18 points, or 0.58 percent, to 5,077.47.
Sentiment also got a boost from talk of mergers and acquisitions.
Altera rose 6.21 percent to $47.18 after the New York Post reported that the company had resumed talks with Intel on a possible deal. Intel was up 0.62 percent.
Endo International fell 5.56 percent to $80.60 after the generic drugmaker said it would buy privately held Par Pharmaceutical from TPG Capital in a $8.05 billion deal.
Alibaba fell 1.6 percent after a group of luxury goods makers sued the company on Friday, contending that the Chinese e-commerce giant knowingly made it possible for counterfeiters to sell their products throughout the world.
Advancing issues outnumbered declining ones on the NYSE by 1,577 to 1,428, for a 1.10-to-1 ratio on the upside; on the Nasdaq, 1,719 issues rose and 1,014 fell for a 1.70-to-1 ratio favoring advancers.
The S&P 500 was posting 34 new 52-week highs and 2 new lows; the Nasdaq Composite was recording 111 new highs and 39 new lows. (Additional reporting by Tanya Agrawal and Sweta Singh, editing by Saumyadeb Chakrabarty and Nick Zieminski)