Stocks edge up as investors try to extend rally

NEW YORK -- Stocks edged higher in midday trading Tuesday as investors tried to extend a huge three-week rally.

Stocks had wavered in early trading, pausing from a recent surge that catapulted the Standard & Poor's 500 index past the 1,000 mark on Monday for the first time since November.

At first, investors appeared little fazed by the day's earnings and economic news and investors focused instead on locking in some profits following a 14% climb in the S&P 500 and Dow Jones industrials since July 10.

But reports showing an uptick in consumer spending and a fifth straight monthly increase in pending home sales provided the latest evidence that the economy is stabilizing.

"The path of least resistance seems to be up," said John Canally, economist at LPL Financial.

Investors have seen better-than-expected corporate earnings reports and encouraging outlooks this summer as well as data showing improvement in manufacturing and housing. Those promising signs have driven hopes that the nearly two-year-long recession is coming to an end, pushing stocks up to levels not seen since last fall.

Analysts generally believe the market's near-term trajectory is upward, with investors seeing dips as an opportunity to put money to work.

"Everyone that I am talking to is interested in getting more money into the market," said Brian Bush, director of equity research at Stephens. "People don't want to miss this market if it is going significantly higher."

About four stocks rose for every three that fell on the New York Stock Exchange, where volume came to 475.2 million shares, compared with 494.4 million shares at the same time a day earlier.

The market's gains were held in check, analysts said, by Friday's looming jobs report.

Unemployment currently stands at a 26-year high of 9.5%, and that rate is expected to rise as high as 10% this year. Analysts warn that a huge negative surprise in the Labor Department's monthly jobs report could rattle the market.