US STOCKS-U.S. stocks rally on Greek deal optimism

* 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 0.83 pct, S&P 0.81 pct, Nasdaq 0.66 pct (Adds details, changes comment, updates prices)

By Tanya Agrawal

June 22 (Reuters) - U.S. stocks rallied on Monday, with the Nasdaq Composite index hitting a new record high, after euro zone finance ministers welcomed new Greek proposals for a cash-for-reform deal that could avert a debt default.

Nasdaq rose to 5,159.36, surpassing the previous high of 5,143.32 it set last week.

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.

Global stocks were higher on Monday with European shares hitting their highest level in over a week.

"Now (NYSE: DNOW - news) 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. stocks closed lower on Friday as Greek worries weighed but the three major indexes were higher for the week on hopes that the U.S. Federal Reserve's planned rate hike will be slower than previously anticipated.

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 10:58 a.m. ET (1458 GMT) the Dow Jones industrial average was up 149.47 points, or 0.83 percent, at 18,165.42, the S&P 500 was up 17.15 points, or 0.81 percent, at 2,127.14 and the Nasdaq Composite was up 33.86 points, or 0.66 percent, at 5,150.86.

Nine of the 10 major S&P 500 sectors were higher with the healthcare index leading the gains, with a 1.1 percent rise.

The market was also boosted by M&A chatter over the weekend as companies rush to make the best of the zero-rate interest environment before an expected hike this year.

Cigna (NYSE: CI - news) 's shares rose 7 percent to $166.28 after the health insurer rebuffed Anthem (NYSE: ANTM - news) 's $47 billion merger proposal on Sunday. Anthem was up 4.8 percent to $173.

Humana (NYSE: HUM - news) was up 0.4 percent at $203.13 as sources said Cigna along with Aetna (NYSE: AET - news) are participating in an auction to acquire the company. Aetna was up 4.4 percent at $129.52.

Williams Cos soared 25.2 percent to $60.51 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 (NYSE: MSO - news) dipped 14 percent to $6 after Sequential Brands (NasdaqCM: SQBG - news) 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 2,003 to 924. On the Nasdaq, 1,701 issues rose and 912 fell.

The S&P 500 index showed 48 new 52-week highs and one new lows, while the Nasdaq recorded 174 new highs and 12 new lows. (Editing by Don Sebastian)