* Financials up as usually bearish analyst talks like a bull * Corporate earnings awaited for clues on economy * Dow up 1.7 pct; S&P 500 up 1.8 pct; Nasdaq up 1.5 pct (Updates to afternoon, changes byline)
By Caroline Valetkevitch
NEW YORK, July 13 (Reuters) - U.S. stocks rallied on Monday as bullish comments on banking sector performance from analyst Meredith Whitney lifted hopes that banks' quarterly results may be stronger than expected.
Whitney also upgraded Goldman Sachs to a "buy" this morning, driving its stock up 5.4 percent to $149.59. The S&P Financial Index, meanwhile, rose 4.5 percent.
In comments to CNBC television, she said bank shares were in for at least a short-term gain of 15 percent and that major financials, including Bank of America Corp and JPMorgan Chase & Co, which along with Goldman are scheduled to report results this week, could do well in the second quarter.
Comments from Whitney, who has in the past been more bearish, offset concerns that CIT Group Inc, a lender to many small- and mid-sized businesses, was struggling to stay afloat.
The Goldman Sachs upgrade "kind of turned sentiment around short-term. It was enough to send the market up," said Fred Dickson, market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. "Basically, people are putting a little bit of money on the table ahead of ... earnings this week."
Dickson also said the gains come on the heels of four straight down weeks for the Dow and S&P 500, suggesting the market had gotten oversold.
The Dow Jones industrial average was up 137.24 points, or 1.68 percent, at 8,283.76. The Standard & Poor's 500 Index was up 15.88 points, or 1.81 percent, at 895.01. The Nasdaq Composite Index was up 26.74 points, or 1.52 percent, at 1,782.77.
Stronger-than-expected first-quarter bank earnings prompted sharp gains in the sector's stocks and helped fuel a rally of as much as 40 percent in the S&P 500 from March through May.
With second-quarter results, investors will be looking for evidence or upbeat comments from companies that suggest the economy is getting better.
In news that underscored the recession's fallout, commercial lender CIT Group said late Sunday it remained in discussions with regulators on measures to improve its near-term liquidity. In addition, the Wall Street Journal reported the company had hired a law firm to explore a possible bankruptcy filing.
CIT shares fell 9.2 percent to $1.39.
Other companies expected to report results this week include General Electric, International Business Machines, Intel Corp and Johnson & Johnson; all are Dow components. Citigroup, a former Dow component, is also set to report results later this week. (Editing by Jan Paschal)