(Corrects ninth paragraph to show Forest Labs, not Mylan, as best performer on the S&P 500)
* U.S. home builder sentiment plunges in February
* Coke shares fall after results, weigh on Dow industrials
* Forest Labs shares jump, Actavis to purchase
* Dow flat, S&P up 0.2 pct, Nasdaq up 0.7 pct
By Rodrigo Campos
NEW YORK, Feb 18 (Reuters) - U.S. stocks edged up on Tuesday, following Wall Street's biggest gain of the year, as merger activity boosted confidence there is still value in the market even as the S&P 500 nears a record high.
The Nasdaq Composite was up for an eighth straight session, a streak not seen since early July.
Economic reports were disappointing, but following a recent pattern, soft data was mostly dismissed by the market and blamed on the weather. U.S. homebuilder confidence suffered its largest one-month drop ever in February, and the New York Federal Reserve's gauge of manufacturing was weaker than expected.
"We're going to see weather as a huge brush over a lot of economic data, mostly if it is related to the consumer," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
"People don't go out and look at homes in crappy weather."
Forest Laboratories was the best performer on the S&P 500 after Actavis said it would acquire the specialty pharmaceuticals company in a cash and stock deal valued at about $25 billion.
"This has everything to do with the changing face of healthcare and how we pay for it in the United States," said Fort Pitt's Forrest.
"If there was one big deal, there could be others."
Forest Labs shares soared 29.5 percent to $92.43 and was the best performer on the S&P 500. Shares of generic drug makers Teva and Mylan rose on the news. Teva was last up 3.4 percent at $45.69 and Mylan, up 5.3 percent at $48.56, was the best performer on the Nasdaq 100. Mylan shares hit a record intraday high.
The Dow Jones industrial average fell 7.58 points or 0.05 percent, to 16,146.81, the S&P 500 gained 2.89 points or 0.16 percent, to 1,841.52 and the Nasdaq Composite added 29.265 points or 0.69 percent, to 4,273.29.
Coca-Cola Co reported global sales volumes below expectations and its stock fell 3.8 percent to $37.47, weighing on the Dow.
With few obvious justifications for stocks climbing further, investors are left in the position they were in at the beginning of the year: unsure about the economy and earnings, but facing an environment where few other assets offer the same potential return as the equity market.
Tesla Motors Inc shares hit an all-time high following a report Apple's mergers and acquisitions chief, Adrian Perica, met Tesla Chief Executive Elon Musk last year, sparking speculation Apple could be interested in buying the electric car maker.
Tesla shares rose 3.2 percent to $204.54 after hitting a record intraday high of $205.72. Apple shares were up 0.9 percent at $548.98.
U.S.-traded shares of BlackBerry Ltd jumped 6.6 percent to $9.58. Dan Loeb's Third Point LLC Hedge fund disclosed a 10-million-share stake in the Canadian company.
Swedish mobile phone game maker King, best known for the hit Candy Crush Saga, is planning a U.S. stock market debut which could value it at more than $5 billion and trigger a flurry of technology company listings. (Reporting by Rodrigo Campos; Editing by Bernadette Baum and Nick Zieminski)