Stocks closed mostly higher as investor sentiment was helped by lower bond yields and General Electric, which boosted the Dow after hitting a 5-year high.
But the gains came after a tug of war that kept stocks near the flatline most of the session.
"We're kind of backing and filling in a normal pause to refresh," Al Goldman, chief market strategist at A.G. Edwards, told CNBC.com. "This market bends a little bit but it doesn't break. The buyers are a little bit tired but the sellers are not very aggressive."
"I think we trade sideways with a little bit of caution for the next couple of weeks," said Bill Nichols, senior managing director of equity trading at Bear Stearns. "We're at a time in the marketplace where we are just waiting for second-quarter earnings."
Industrials was the best performing S&P 500 sector, helped by GE and airlines stocks. General Electric shares rose to a 5-year high, gaining more than 3%, after breaking through a key technical level. Earlier, the Dow component said it bought a stake in natural gas company Regency Energy Partners. GE owns CNBC.
Airlines stocks gained after UBS raised its rating on US Airways to neutral from reduce.
Major consumer electronics companies suffered because of a profit miss from Best Buy.
Investors were once again keeping a close eye on interest rates in the bond market. Treasury prices rose, sending yields lower.
"We crested at 5.3% on the yield for the 10-year and now we've backed up," said Arthur Hogan, managing director at Jefferies. "So, directionally, we're moving in the right way."
Top U.S. consumer electronics retailer Best Buy said its quarterly profit fell, dragged down by sales of lower margin products. Best Buy reported net income of 39 cents a share for its fiscal first quarter, lower than the 51 cents a share analysts, on average, had been expecting, according to Thomson Financial.
"We're trying to get above recent highs again and we're hitting a lot of resistance," said Scott Fullman, director of investment strategy for Israel A. Englander & Co. "Part of it's going to come from the consumer because the consumer is two-thirds of the economy."
The Commerce Department said housing starts in May fell, dropping by 2.1%, however building permits rose last month by 3%. The numbers did little to boost sentiment about the slump in the housing market.
"I'm really a little concerned about the building permits number," said Scott Martin, director at Astor Asset Management. "When we see these numbers that came out today that were in line with expectations and solid building permits, that tells me that we're not through this slowdown yet. We are going to be waiting for bad numbers in the future instead of just getting this over with."
Carnival , the world's largest cruise operator, beat second-quarter estimates by a penny, however the company's guidance for the third quarter and the full-year was below Wall Street estimates.
Shares of Bristol-Myers Squibb rose after a judge ruled that the company's patent with Sanofi-Aventis for the blood thinner Plavix was valid.
A private equity consortium has agreed to buy Home Depot's supply division for $10 billion, according to a Reuters report. Bain Capital, Carlyle Group and Clayton, Dubilier & Rice won the auction and were finalizing the transaction, according to sources close to the deal.
Travel Web site operator Expedia said Tuesday it plans to buy back up to 42% of its common stock for $3.5 billion. Expedia will buy back up to 116.7 million shares for no less than $27.50 per share and no more than $30 per share. The stock was trading higher.
Yahoo was getting a lot of attention after the struggling Internet portal announced late Monday that CEO Terry Semel is to be replaced by co-founder Jerry Yang.
The rivalry between Boeing and Airbuslooked set to increase after Delta Air Lines said it was ready to refresh its fleet of widebody jets, but won't decide on whether to go with Boeing's 787 Dreamliner or the Airbus A350 XWB until the end of the year, according to the Wall Street Journal.
New York light sweet crude futures finished the session basically unchanged, trading around $69 a barrel.
European Stocks Finish LowerEuropean shares closed lower following news of weaker-than-expected business sentiment in the German economy Tuesday, and a lackluster trading day in Asia.
The London FTSE-100, and the Paris CAC-40 finished lower, while the Frankfurt DAX was basically flat.
German economic sentiment unexpectedly declined in June from the previous month, according to a survey from the ZEW, or Center for European Economic Research.
In corporate news, the European banking sector saw further consolidation as Amsterdam-based ING Groepagreed to buy Turkey'sOyak Bank for $2.673 billion. ING stock rose.
And shares of Cadbury Schweppes gained as the confectionery group announced it was to cut 15% of jobs and factories, ahead of the likely sell-off of its U.S. drinks business Schweppes.
Tesco shares declined, however, as Britain's largest retailer reported a dip in sales growth for the 13 weeks up to May 26, with a 4.7% rise in its U.K. like-for-like sales, excluding fuel.
Asian Stocks Drift
The Nikkei 225 hovered in-and-out of negative territory as profit-took centerstage. But brokerages supported the market after Daiichi Sankyo and Nikon Corp. received brokerage upgrades.
Bank of Japan's Governor Toshihiko Fukui's latest comments did little to lift the market. He said the central bank is "extremely conscious" of the yen's fall to record levels against the euro, and the effect foreign exchange intervention can have on worldwide markets -- a reference to the currency's accelerated decline since last Friday when he indicated caution over a possible interest rate hike in July.
Over in South Korea, the KOSPI retracted from its morning gains. The index briefly hit its fourth consecutive record at 1,813.39 on Tuesday.
Investors continued to buy into shipbuilders like Hyundai Heavy as analysts predicted strong demand will increase vessel prices. But shares of LG Electronics LCD dropped nearly 2% after hitting its highest level in over a year the previous session.
Australia's benchmark S&P/ASX 200 index was slightly higher as energy shares climbed as London's Brent crude jumped over $72. Shares of Woodside Petroleum climbed almost 2%.
Investors are watching shares of BHP Billiton, after reports said the top miner hired Merrill Lynch to submit a possible counter bid for Canadian Aluminum producer Alcan. BHP Billiton has not commented on the rumours. Its shares rose 0.8% in afternoon trading.
South-east Asian markets climbed higher as Singapore's STI and Malaysia's KLCI both hit record intraday highs.