US STOCKS-Wall St rises with commodities, M&A hopes

* Resource shares rise with commodity prices

* Kraft bid for Cadbury raises M&A hopes

* Dow up 0.5 pct, S&P up 0.7 pct, Nasdaq up 0.5 pct

(Updates to midmorning)

By Leah Schnurr

NEW YORK, Sept 8 (Reuters) - U.S. stocks climbed on Tuesday as natural resource shares rose alongside commodities and Kraft's bid for Cadbury buoyed hopes that more merger and acquisition activity was on the horizon.

Kraft Foods Inc said it was intent on pursuing Britain's Cadbury Plc , which rejected a $16.7 billion bid from the U.S. company. Kraft shares tumbled 5.1 percent to $26.67, limiting gains on the Dow. For details, see [ID:nL7524247]

"You get some M&A activity, and the market perceives that as potentially the start of more," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.

M&A activity can be a signal to the market that some shares are considered inexpensive.

"It's been talked about a lot that as you come out of the bottom of a recession, (you should see) those that are in good shape gobbling up those that are struggling," Pado said.

The Dow Jones industrial average <.DJI> gained 45.72 points, or 0.48 percent, to 9,486.99. The Standard & Poor's 500 Index <.SPX> rose 7.06 points, or 0.69 percent, to 1,023.46. The Nasdaq Composite Index <.IXIC> put on 10.35 points, or 0.51 percent, to 2,029.13.

Energy shares led the S&P 500 higher as oil futures jumped nearly 4 percent to top $70 a barrel ahead of an OPEC meeting. Analysts said no change in output limits was expected. Chevron Corp rose 2 percent to $70.37, while the S&P index of energy companies <.GSPE> was up 2.3 percent. [ID:nL8235192]

Newmont Mining Corp jumped 2.3 percent to $47.30 as spot gold

Health insurance stocks <.HMO> fell 0.3 percent ahead of U.S. President Barack Obama's address to Congress on Wednesday. He is expected to outline his proposed revamp of the healthcare system.

Shares of General Electric Co gained 4.7 percent to $14.52 after J.P. Morgan Securities upgraded the stock to "overweight" from "neutral," saying it was one of the last equities for which a little good news could still go a long way. [ID:nBNG44387]

Shares of iPod maker Apple Inc rose 1.2 percent to $172.42 after Morgan Stanley raised its price target to $200 from $195. The firm also raised the U.S. systems and PC hardware sector to "attractive" from "in line." [ID:nBNG31681]

(Reporting by Leah Schnurr; editing by Jeffrey Benkoe)