Stocks edge higher after mixed economic reports

NEW YORK The stock market edged up in early afternoon trading Tuesday after two key reports gave a mixed picture of the U.S. economy.

One showed that home prices in July rose the most in more than seven years. Another showed that Americans' confidence in the economy fell slightly in September as many people became less optimistic about hiring and pay increases.

On Tuesday, the market's afternoon gains were modest. Investors are concerned that the federal government could shut down as early as next week because Washington lawmakers appear to be making little progress in budget talks.

The stock market had fallen for three straights days after hitting an all-time high last Wednesday. The record high followed the Federal Reserve's decision to hold steady its bond-buying program, which has encouraged ultra-low interest rates and helped drive the stock market higher this year. Investors are now looking for more guidance from the Fed and are worrying about the political gridlock in Washington.

"A government shutdown starting next week is looking increasingly likely," said Jim Russell, a regional investment director at U.S. Bank. "That will not be welcomed by the capital markets."

The Dow Jones industrial average was up 14 points to 15,415 at 12:22 p.m. ET. The Standard & Poor's 500 index rose two points to 1,704. The Nasdaq composite edged up 13 points to 3,779.

Consumer discretionary stocks were the biggest gainers among the 10 industry groups that form the S&P 500. The sector rose despite a report showing that consumer confidence has edged lower.

The Conference Board, a New York-based private research group, said that its consumer confidence index dropped to 79.7 in September, down from August's 81.8.

Consumers' confidence is closely watched because their spending accounts for 70 percent of U.S. economic activity. Confidence has grown since the Great Recession, but it hasn't hit a reading of 90, which typically accompanies a healthy economy.

Before the market opened, a report showed that home prices rose the most since February 2006. A revival in housing has been one of the bright spots for the economy.

The Standard &Poor's/Case-Shiller 20-city home price index reported Tuesday that U.S. home prices rose 12.4 percent in July compared with a year earlier. An increase in sales on a limited supply of available homes drove the gains.

The yield on the 10-year Treasury note rose fell to 2.65 percent from 2.70 percent late Monday.

Among stocks making big moves:

- Red Hat, a software company, fell $5.62, or 11 percent, to $47.31, after the company said that billings for the quarter were lower than expected and it issued disappointing revenue predictions for the current quarter and full year.

- Applied Materials, a chip-making equipment manufacturer, rose $1.18, or 7 percent, to $17.17, after it agreed to acquire rival Tokyo Electron.

- Facebook rose $1.93, or 4 percent, to $49.11 after Citigroup upgraded the company's stock to a "buy" recommendation from "neutral," saying that it expects the company to continue to grow, helped by increasing advertising revenue contributions from its mobile website.

-Carnival, the cruise ship operator, fell $2.56, or 7 percent, to $34.86 after the company said that it expects revenue to drop more than its prior forecast.