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Stocks struggled to advance in volatile trading on Tuesday, with major averages looking to halt a three-day decline, but gains were limited as investors remained cautious amid uncertainties surrounding the Federal Reserve's stimulus program and budget discussions in Washington.
The Dow Jones Industrial Average recovered from earlier lows and was 14 points ahead in afternoon trading. The S&P 500 rose slightly above 1,700, while the Nasdaq toggled in and out of positive territory. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 14.
Among key S&P sectors, industrials led the gainers, while telecoms lagged.
Home prices climbed 0.6 percent in July, according to the S&P/Case-Shiller composite index of 20 metropolitan areas. Compared to a year earlier, prices were up 12.4 percent, matching economists' expectations and marking the strongest rise since February 2006.
"The recovery in housing has been an important source of support for the U.S. economy, with residential investment adding to real GDP (gross domestic product) growth for eight consecutive quarters," said Barclays analysts Hamish Pepper and Cagdas Aksu in a note on Monday.
Meanwhile, the consumer confidence index declined slightly in September to 79.7 from a revised 81.8 in August, according to the Conference Board. Economists polled by Reuters expected a reading of 79.9.
In a busy week for speeches by Fed officials, New York Fed President William Dudley and Atlanta Fed President Dennis Lockhart took a dovish tone at the start of the week. Dudley said he supported the Fed's surprise decision to delay scaling back its monthly $85 billion bond-buying program, given the lack of momentum in the U.S. economy.
Dallas Fed President Richard Fisher, however, was more hawkish, indicating that he would have opposed the inaction if he had a vote.
(Read more: Stocks rudderless as DC agenda dominates)
Kansas City Fed President Esther George was due to speak later on Tuesday. Last week, she said the Federal Reserve created confusion in the market with its lack of decision to taper. Cleveland Fed President Sandra Pianalto was also scheduled to make a speech on Tuesday.
Investec analysts described the "Fed flustering" as a "very bad one-sided baseball game."
"Bernanke threw a massive curveball with a surprise no taper on Wednesday saying any scale back would be data dependent," the analysts wrote in a note on Tuesday. "(On Monday) it was Dudley and Fisher off the benches, throwing dovish and hawkish fastballs just to confuse us all a bit more. The world series of mixed messages isn't over quite yet however, we have nine more Fed speakers on the mound before the week is out."
(Read more:Fisher: Fed selection process 'terribly' mishandled)
Concerns over the debt ceiling lingered ahead of the October 1 deadline for Congress to pass a resolution to keep the government funded. If a deal is not struck, it could force a partial shutdown of the government.
(Read more: Here's who might win if DC shuts down)
"We're going to tread water until Washington figures out what to do," said Brian Battle, vice president of trading at Performance Trust Capital Partners. "They'll likely wait until the last minute and the political solution seems to be to kick the can down the road."
(Read more: 'Dr. Doom' Roubini makes case FOR the US economy)
In the debt market, meanwhile, the Treasury was expected to sell $33 billion of two-year notes on Tuesday.
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