Stocks rise slightly as consumer confidence improves

NEW YORK -- Stocks rose modestly Tuesday as a dividend hike at IBM and reassuring data that could signal a bottom in the economic cycle offset concerns that major banks may need to raise more money.

Stocks erased early losses as investors took comfort from a Conference Board report that its consumer confidence index surged 12 points to 39.2 from a revised 26.9 in March.

The reading is the highest since November and far better than the 29.5 number that economists had expected. The report suggests consumers might be willing to spend more if confidence continues to build.

Stocks fell ahead of the confidence reading as investors worried that a growth in swine flu cases could hurt industries such as travel and tourism. The World Health Organization raised its alert to a phase 4 out of 6, saying the flu spreads easily but is not pandemic.

Banking troubles came back into the spotlight after The Wall Street Journal reported Tuesday that U.S. regulators told Bank of America and Citigroup the companies may need to raise more capital.

IBM was a bright spot for the Dow, up 1.7% at $101.68 after its board approved a 10% increase in its dividend and authorized a stock buyback, underscoring strength amid a tough economic climate.

"IBM is strong, and that is also helping the Dow, and some tech stocks are a little firmer," said David Bellantonio, head of trading at Instinet in New York.

"There is not a ton of conviction, but considering the negative news (on banks) it seems to be pretty good."

Bellantonio said the flu outbreak is a concern, adding that it was difficult to say if it is having a specific effect on the market.

In early afternoon trading, The Dow Jones industrial average was up 9.08 points, or 0.1%, to 8,034.08. The Standard & Poor's 500 Index edged up 0.66, or 0.19%, to 858.17. The Nasdaq Composite Index rose 3.27 points, or 0.2%, to 1,682.68.

Later Tuesday, the Federal Reserve will begin its two-day meeting on interest rates. The Fed has already lowered its target rate to a range of zero to 0.25% and started buying Treasurys in an effort to keep market rates low. Investors are curious about the central bank's assessment of the economy, and whether it will accelerate its purchases of government bonds.