* Global markets higher on Greece deal optimism
* Existing home sales surges to 5-1/2- year high
* Nasdaq hits new record high
* Healthcare stocks rise after M&A chatter
* Indexes up: Dow 0.59 pct, S&P 0.63 pct, Nasdaq 0.62 pct (Updates to early afternoon)
By Tanya Agrawal
June 22 (Reuters) - U.S. stocks were higher in early afternoon trading on Monday, helped by a surge in M&A chatter, particularly in the healthcare sector, and on hopes that a deal was nearer to avert a looming crisis in Greece.
The Nasdaq Composite index rose to a record 5,159.36 points, while the S&P 500 came just five points shy of its all-time high.
Healthcare stocks led the gain, with the index rising 0.88 percent on the back on deal activity in the sector.
Stocks also got a boost after euro zone finance ministers welcomed new Greek proposals for a cash-for-reform deal.
The Eurogroup, however, remained cautious and said the proposals required detailed study and it would take several days to determine whether they can lead to an agreement.
"We will work very hard in the next few days, the institutions with the Greek government, to get that deal this week," Jeroen Dijsselbloem, chairman of the 19-nation Eurogroup, told a news conference.
Athens needs fresh funds to avoid defaulting on a $1.8 billion debt repayment to the International Monetary Fund on June 30, and a possible exit from the euro zone.
"Now you're seeing the leaders of (euro zone) countries meeting to reach a deal and the hope that a deal is on the horizon is reflected in the rally today," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
U.S. home resales in May surged to their highest in five and a half years as first-time buyers piled into the market, the latest indication that housing and overall economic activity were gathering steam in the second quarter.
At 12:42 p.m. ET (1642 GMT) the Dow Jones industrial average was up 105.66 points, or 0.59 percent, at 18,121.61, the S&P 500 was up 13.38 points, or 0.63 percent, at 2,123.37 and the Nasdaq Composite was up 31.94 points, or 0.62 percent, at 5,148.94.
Cigna's shares rose 5.4 percent to $163.56 after the health insurer rebuffed Anthem's $47 billion merger proposal on Sunday. Anthem was up 3.9 percent to $171.62.
Humana rose as much as 2.3 percent before reversing course to trade down 1.2 percent to $199.87 as sources said Cigna along with Aetna are participating in an auction to acquire the company. Aetna was up 4 percent at $129.01.
Williams Cos soared 24 percent to $59.94 after Energy Transfer Equity confirmed it had made a $48 billion unsolicited bid for the natural gas pipeline company. Williams rejected the offer as too low.
Martha Stewart Living Omnimedia slumped 12.6 percent to $6.10 after Sequential Brands agreed to buy the company in a deal that values it at about $353 million. Martha Stewart shares had risen about 37 percent over two days after news of the deal emerged.
Advancing issues outnumbered decliners on the NYSE by 1,861 to 1,115. On the Nasdaq, 1,733 issues rose and 994 fell.
The S&P 500 index showed 50 new 52-week highs and one new lows, while the Nasdaq recorded 189 new highs and 16 new lows. (Editing by Don Sebastian)