The S&P 500 and the Nasdaq rose on Tuesday as better-than-expected factory orders and a surge in vehicle sales at Ford Motor Co provided more evidence of an economic recovery.

But a big decline in pending home sales, which fell in November for the first time in nine months, increased concerns about the housing market, capping the broad market's gains and pushing the Dow industrials into the red a day after all three major U.S. stock indexes finished the first trading day of 2010 at the highest levels in over a year.

For the past month, stocks have advanced as investors bet on a series of better-than-expected economic indicators. Much of that optimism appeared to remain intact on Tuesday as S&P indexes for the financial, materials and energy sectors ended the day higher.

Tuesday marked a new 15-month high for the S&P 500 and a 16-month high for the Nasdaq.

There is nothing in here to suggest that investors are backing away at all from the sentiment expressed yesterday, which is one of increased optimism about the global recovery, said Craig Peckham, equity trading strategist at Jefferies & Company in New York.

Peckham pointed to what he termed a slow and measured march higher in expectations for a better reading in Friday's non-farm payrolls report.

The Dow Jones industrial average <.DJI> fell 11.94 points, or 0.11 percent, to end at 10,572.02. The Standard & Poor's 500 Index <.SPX> rose 3.53 points, or 0.31 percent, to finish at 1,136.52. The Nasdaq Composite Index <.IXIC> crept up just 0.29 of a point, or 0.01 percent, to close at 2,308.71.

Ford Motor Co surged 6.6 percent to $10.96, hitting a 4-1/2 year high after it said its December sales rose 33 percent year-over-year, ending a tumultuous 12 months when rivals GM and Chrysler collapsed into bankruptcy

Earlier Tuesday, the government said U.S. factory orders rose more than expected in November. The report, which suggested the manufacturing sector will continue to support a recovery, was released one day after the Institute for Supply Management's index of manufacturing activity beat estimates.

Financials, energy, materials and consumer discretionary stocks gave the biggest boosts to the S&P 500 in a muted rerun of Monday's rally.

The S&P financial index <.GSPF> led the wider market higher, rising 1.6 percent, with Citigroup up 4.4 percent to $3.55.

Pending home sales from the National Association of Realtors fell 16 percent in November compared with economists' expectations of a 2 percent drop.

The U.S. dollar edged slightly higher against a basket of currencies, capping gains in the materials and energy sectors.

U.S. oil futures rose 0.32 percent, or 26 cents, to settle at $81.77 a barrel, the highest closing price since October 9, 2008. This marked the ninth day of gains for oil futures prices.

The Dow's top performer was Kraft Foods Inc , which gained 4.9 percent to $28.77 after Warren Buffett's Berkshire Hathaway voted no on the company's proposal to issue 370 million shares to help finance its proposed purchase of British chocolate candy maker Cadbury Plc .

Volume was light on the New York Stock Exchange, with 1.19 billion shares changing hands, below last year's estimated daily average of 2.18 billion. On the Nasdaq, about 2.39 billion shares traded.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 3 to 2. On the Nasdaq, the opposite trend prevailed, with five stocks falling for every four that rose.

(Reporting by Edward Krudy; Editing by Jan Paschal)

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