* CIT in private deal to avoid bankruptcy -source * Caterpillar, Cisco and Disney all upgraded by analysts * Nasdaq touches intraday high for 2009 (Updates to early afternoon trading, changes byline)
By Ryan Vlastelica
NEW YORK, July 20 (Reuters) - U.S. stocks climbed on Monday, lifted on expectations that lender CIT Group Inc would be able to avoid bankruptcy.
The lender to nearly a million small- and mid-sized U.S. companies reached a deal with bondholders to provide $3 billion in emergency financing to the troubled lender, a source familiar with the situation said. CIT's stock rose nearly 83 percent to $1.28 on the news.
"The rescue they've gotten has been a compromise from bondholders rather than the government. The market has looked kindly on that," said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey, who described CIT as "very strategic" for the economy because it lends to small and mid-sized businesses.
Market sentiment also improved after a number of analysts issued upgrades on several bellwether stocks, including three Dow components.
Bank of America-Merrill Lynch upped Caterpillar Inc to "buy," saying the second quarter could mark a bottom for the construction sector.
Shares of Caterpillar advanced 6.2 percent to $36.11. It topped the list for percentage gainers among Dow components, and helped the Dow Jones U.S. Heavy Construction index rise 2.2 percent.
Elsewhere, Credit Suisse upgraded Cisco Systems to "outperform," writing that field checks indicated improving business trends throughout the quarter.
Morgan Stanley lifted Walt Disney Co to "overweight" from "equal-weight" as part of a larger call on the media sector, which the firm upgraded to "attractive."
Cisco shares added 2.8 percent to trade at $21.09, while Disney gained 2.5 percent to $25.12.
Also in company news, Human Genome Sciences Inc soared 221.7 percent to $10.68 after its experimental lupus drug was successful in a late-stage clinical trial.
Halliburton, Johnson Controls, Eaton and Hasbro were among the companies that advanced on quarterly results that impressed investors.
The Dow Jones industrial average gained 50.33 points, or 0.58 percent, to 8,794.27. The Standard & Poor's 500 Index rose 4.85 points, or 0.52 percent, to 945.23. The Nasdaq Composite Index added 12.21 points, or 0.65 percent, to 1,898.82. Earlier in the session, the tech-heavy Nasdaq hit an intraday high for the year of 1,906.24.
Driven higher by earnings, the broad S&P 500 finished last week with a 7 percent gain for its best week since mid-March. The S&P 500 is up 39.7 percent from a 12-year closing low hit on March 9.
Stifel's Caron said "the combination of strong earnings and CIT is the short-term catalyst" for Monday's upside move.
Companies scheduled to report quarterly results after the close include Texas Instruments Inc, Legg Mason Inc and Zions Bancorp.
Despite warning of significant risk of a "double-dip" recession, Goldman Sachs raised its year-end target for the S&P 500 to 1,060 from 940 -- a boost of 12 percent from current levels.
On Monday, an index gauging the U.S. economy's prospects increased for a third straight month in June, suggesting the recession was drawing to a close, the Conference Board said. The index of leading economic indicators gained 0.7 percent in June, exceeding economists' forecasts, and following May's revised increase of 1.3 percent. (Editing by Jan Paschal)