US STOCKS-S&P, Nasdaq up on strong factory orders

* Pending home sales drop, new factory orders increase

* Dow off 0.1 pct, S&P up 0.2 pct, Nasdaq up 0.1 pct

* For up-to-the-minute market news, click STXNEWS/US (Adds factory orders, pending home sales data)

By Angela Moon

NEW YORK, Jan 5 (Reuters) - The S&P 500 and the Nasdaq gained on Tuesday as investors welcomed further signs of improvement in the manufacturing sector, brushing off a sharp slump in pending home sales for November.

U.S. stocks briefly extended losses after the National Association of Realtors said pending home sales dropped 16 percent after rising for nine straight months.

But the losses were erased after the government said new factory orders rose 1.1 percent in November for their third straight increase. The data suggested the manufacturing sector would continue to support an overall economic recovery. For details, see [ID:nN0548802] and [ID:nN04215160]

"I think people are more willing to shake off these November pending home sales numbers and focus more on the factory orders number, which had an upward revision for the prior month. It's a much more positive economic sign," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.

The Dow Jones industrial average .DJI was down 10.96 points, or 0.10 percent, at 10,573.00. The Standard & Poor's 500 Index .SPX was up 2.10 points, or 0.19 percent, at 1,135.09. The Nasdaq Composite Index .IXIC was up 3.12 points, or 0.14 percent, at 2,311.54.

Investors will get a fresh picture on the state of consumer spending as automakers report U.S. vehicle sales for December. Economists expect median annualized domestic sales of 3.90 million cars and 4.45 million trucks, versus 3.87 million cars and 4.44 million trucks sold in November. (Reporting by Angela Moon; editing by Jeffrey Benkoe)