Nginx redirect request based path variable

Question

I have an html web server running on my EC2 instance on port 80 (HTTP). I'm using Nginx as a reverse proxy (which is also installed on the instance) to redirect requests from port 8080 based on the path ('/blue') to my HTML web server. So I'm requesting HTTP://ec2_instance_dns:8080/blue and expect to redirect to HTTP://ec2_instance_dns:80. However, I'm having issues redirecting the request based on the path variable. My /etc/nginx/conf.d/deafult.conf attached below:

server {
    listen                      8080;
    server_name                 default;
    client_max_body_size        32M;
    underscores_in_headers      on;

    root                        /var/www/html/index.html;

    location /blue {
        proxy_set_header        Upgrade $http_upgrade;
        proxy_set_header        Connection "upgrade";
        proxy_http_version      1.1;
        proxy_set_header        Host $host;
        proxy_read_timeout      120;
        proxy_next_upstream     error timeout invalid_header http_500;
        proxy_connect_timeout   90;
        proxy_pass              http://localhost:80;
    }
}

My /etc/nginx/nginx.conf attached bellow:

user nginx;
worker_processes auto;
error_log /var/log/nginx/error.log;
pid /var/run/nginx.pid;

include /usr/share/nginx/modules/*.conf;

events {
    worker_connections 1024;
}

http {
    log_format  main  '$remote_addr - $remote_user [$time_local] "$request" '
                      '$status $body_bytes_sent "$http_referer" '
                      '"$http_user_agent" "$http_x_forwarded_for"';

    access_log  /var/log/nginx/access.log  main;

    sendfile            on;
    tcp_nopush          on;
    tcp_nodelay         on;
    keepalive_timeout   65;
    types_hash_max_size 2048;

    include             /etc/nginx/mime.types;
    default_type        application/octet-stream;

    include /etc/nginx/conf.d/*.conf;

    server {
        listen       8080;
        listen       [::]:8080;
        server_name  localhost;
        root         /var/www/html/index.html;

        include /etc/nginx/default.d/*.conf;

        location / {
        }

        error_page 404 /404.html;
            location = /40x.html {
        }

        error_page 500 502 503 504 /50x.html;
            location = /50x.html {
        }
    }
}

When trying to request HTTP://ec2_instance_dns:8080/blue I'm getting the above error:

What further configuration should I do? Thank you.