Stocks struggle higher

Stocks erased losses, mustering small gains early Tuesday after a stronger-than-expected consumer confidence report countered fears about the viability of U.S. banks and the potential economic impact of swine flu.

The Dow Jones industrial average (INDU) gained 20 points, or 0.3%, over an hour into the session. The S&P 500 (SPX) index gained 2 points, or 0.2%. The Nasdaq composite (COMP) gained 5 points, or 0.3%.

The April consumer confidence index rose to 39.2 from a revised 26.9 in the previous month. Economists surveyed by Briefing.com thought it would improve to 29.7.

Stocks had tumbled in the first minutes of trade, extending the previous session's selloff, as investors stepped back after the recent run. Stocks rallied for six straight weeks on bets that the worst for the economy has already happened, then seesawed last week as quarterly results began to pour.

This week investors have been keeping an eye on the banks and the latest reports on the swine flu outbreak.

Bank sector: Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500) will need to raise more capital, according to initial government "stress tests," the Wall Street Journal reported. Regulators reportedly told the banks that they need to boost their reserves to prepare for a potential worsening of the economy.

Results of Treasury's tests of the largest U.S. banks aren't due until next week.

Bank of America shares fell 5%, Citi dropped 4% and the KBW Bank (BKX) sector index fell 1%..

Swine flu: Concerns about the economic impact of the swine flu outbreak remained in place Tuesday as health officials have confirmed at least 90 cases of the disease worldwide and 50 in the United States.

Economists are concerned that should the outbreak become a large-scale pandemic, it would throw off a global economic recovery attempt and even intensify the recession.

Economy: The S&P/Case Shiller 20-city home price index fell 18.6% in February from a year ago, extending the losing streak to 31 months. But it was the first time since October 2007 that the index didn't hit a record low in its year-over-year drop.

Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.93% from 2.92% Monday. Treasury prices and yields move in opposite directions.

Lending rates were mixed. The 3-month Libor rate fell to 1.04% from 1.05% Monday, according to Bloomberg.com. The overnight Libor rate was unchanged at 0.21%. Libor is a bank-to-bank lending rate.