Stocks edged higher on Friday, with the S&P 500 on track for a fourth straight day of gains as a batch of economic data pointed to an economy that continued to grow at a modest pace.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.2 percent last month after declining 0.9 percent in October, the government said. U.S. consumer spending was tepid for the month.

In another report, new U.S. single-family home sales rose to a seven-month high in November and the supply of houses on the market was the lowest in 5-1/2 years, adding to signs of a budding recovery in the sector.

The data itself has been modestly stronger in the fourth quarter but nothing that changes the baseline slow growth story, said Andrew Slimmon, managing director, Global Investment Solutions of Morgan Stanley Smith Barney in Chicago.

What is so tragic about 2011 is that investors have reacted poorly in multiple ways to a baseline economic story that has been incredibly consistent. The economy has been far less volatile than investors' expectations for what has been going on in the economy.

The Dow Jones industrial average <.DJI> gained 42.35 points, or 0.35 percent, to 12,212.00. The Standard & Poor's 500 Index <.SPX><.INX> rose 3.38 points, or 0.27 percent, to 1,257.38. The Nasdaq Composite Index <.IXIC> added 1.09 points, or 0.04 percent, to 2,600.54.

The benchmark S&P has risen 3.1 percent this week as data pointed to a gradual improvement in the economy, nudging the index just above the unchanged mark for the year.

Volume was expected to be light ahead of the extended Christmas holiday weekend, and could spark exaggerated market swings. The New York Stock Exchange will have normal trading hours, but the bond market will close at 2:00 p.m. EST (1900 GMT).

The U.S. Congress approved a two-month extension of a payroll tax cut for 160 million American workers that otherwise would have expired on December 31, wrapping up a tumultuous year of battles over spending and taxes.

SunPower Corp jumped 10.8 percent to $6.49 after the solar panels maker reached a deal to acquire rival Tenesol, a unit of France's Total SA . At the same time, Total is buying 18.6 million SunPower shares, raising its stake to about 66 percent.

WPX Energy Inc will replace Compuware Corp in the S&P MidCap 400 index, Standard and Poor's said.

Exterran will replace Skyline Corp in the S&P SmallCap 600 index. The changes are effective at the close of trading on Friday, December 30.

Compuware fell 2.6 percent to $8.11, Exterran was off 4.4 percent to $9.12, and Skyline dropped 7 percent to $4.36.

(Reporting By Chuck Mikolajczak; editing by Jeffrey Benkoe)