You currently have the whole canvas selected as shown by the dotted line. What you should do is use the Rectangular Marquee tool (top left dotted square) and select only the size of the image you want to resize. Then from there, you can press Control + T on your keyboard to transform your shape. This should bring up small squares on the corner and edges of the image, simply select one of the corner squares to make bigger or smaller.
For additional information, tutorials and help, please visit our Photoshop Help - Resizing Images page.
Hope this helps!