Wall Street pared an earlier advance to end mixed Tuesday as investors' persistent concerns about interest rates and the economy countered relief over an upbeat homebuilding report.

At the close of trading, the Dow Jones industrial average gained 32.72, or 0.3 percent, to 10,974.84, after rising almost 88 points earlier.

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Broader stock indicators finished little changed. The Standard & Poor's 500 index fell 0.02 to 1,240.12, and the Nasdaq composite index lost 3.36, or 0.16 percent, to 2,107.06.

A sharply stronger-than-expected jump in new home construction fed optimism that the overall economy remains sturdy in the face of higher lending rates and gasoline prices. However, disappointing forecasts for June business sent homebuilders' shares sliding.

Upbeat sales from Caterpillar Inc. (CAT) and steady oil prices also gave stocks support. But while the market recovered somewhat from Monday's decline, erratic trading like Tuesday's is anticipated while investors await the Federal Reserve's latest statement on inflation and economic growth after its meeting next week.

Analysts say the lack of economic data will likely leave investors unsure about buying stocks until the Feds' interest rate decision. Last week, increased certainty that the central bank will hike rates again helped the market steady itself from nearly six weeks of losses, but Wall Street has since struggled to build momentum.

"I think today is more of a quiet rally or stabilizing in the marketplace," said Jay Suskind, head trader at Ryan, Beck & Co. "Inflation, stagflation, interest rates — there are all those words out there making this a very tough market."

Bonds slipped, with the yield on the 10-year Treasury note edging up to 5.15 percent from 5.14 percent late Monday. But the 2-year yield stood at 5.19 percent, signaling less confidence in long-term debt amid expectations of an economic slowdown.

Crude futures leveled off despite continued tension over Iran's nuclear arms program, which some traders suggested could be a sign of near-term stability for the energy market. A barrel of light crude dropped 4 cents to settle at $68.64 on the New York Mercantile Exchange.

Elsewhere, the U.S. dollar pulled back against the Japanese yen and was barely changed versus European currencies. Gold prices recovered an earlier dip to reach about $580 per ounce.

Overseas, Japan's Nikkei stock average slid 1.43 percent in the wake of Wall Street's Monday decline. However, Britain's FTSE 100 gained 0.57 percent, Germany's DAX index rose 1 percent and France's CAC-40 was higher by 0.88 percent.

Wall Street appeared to be coming to terms with the fact that the recent uptick in core inflation has almost guaranteed a rate hike from the Fed next week and has raised the chances of another increase in August. Although stocks have steadied from their recent pullback, investors were waiting for the Fed's opinion of the economy before placing bets.

"The market has pretty high expectations that two more hikes are coming and that there won't be any cuts," said Scott Merritt, U.S. equities strategist for JPMorgan Asset Management. "I think the market has fully discounted that in their prices."

In economic news, the Commerce Department said May housing starts grew 5 percent to 1.96 million to beat estimates of 1.87 million, while the number of permits issued slid 2 percent to 1.93 million. The upswing in homebuilding activity was attributed to improved weather last month.

But a weak June outlook dragged on homebuilders. D.R. Horton Inc. (DHI) shed 61 cents to $23.40, Hovnanian Enterprises Inc. (HOV) lost 34 cents to $28.65 and Toll Brothers Inc. (TOL) slid 49 cents to $26.05.

Supermarket chain Kroger Co. (KR) said its first-quarter earnings rose 4 percent on improved sales and reiterated its full-year forecast. Kroger jumped $1.01 to $20.47.

Dow Jones industrial Caterpillar reported an 8 percent jump in worldwide machinery sales for the March-May period, lifted by strength in the oil and gas and marine segments. Caterpillar advanced $1.04 to $70.99.

Fellow Dow component McDonald's Corp. (MCD) made an alliance with Chinese oil company Sinopec to build drive-through restaurants at some of its 30,000 gas stations throughout China. McDonald's rose 11 cents to $32.96.

Target Corp. (TGT) said its June same-store sales were tracking toward the upper half of a projected 3 percent to 5 percent growth range. Target nonetheless fell 6 cents to $49.04.

Declining issues overtook advancers by 9 to 7 on the New York Stock Exchange, where preliminary consolidated volume came to 2.37 billion shares, compared with 2.25 billion shares traded Monday.

The Russell 2000 index of smaller companies fell 3.26, or 0.48 percent, to 677.50.

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