Home prices rose 0.9 percent in December, according to the S&P Case-Shiller's composite index of 20 metropolitan areas, beating expectations for a gain of 0.5 percent. Prices in the 20 cities jumped 6.8 percent year-over-year, posting the best gain since 2006.
Both European and Asian shares traded lower on Tuesday after Italy's election on February 24-25 resulted in deadlock, with no party gaining sufficient seats to win a majority in the country's upper house. Analysts warned a hung parliament would make it even harder to pass key legislation needed for structural and fiscal reforms.
(Read More: Italy 'Hung, Drawn and Quartered' by Political Deadlock)
"It was the worst possible outcome, feared by market participants and European policy-makers alike," said Tobias Blattner, European economist at Daiwa Capital Markets. "Italy is facing Greek-style political gridlock and possibly new elections."
Meanwhile, analysts expect Federal Chairman Ben Bernanke to try to counter market concerns about Italy, when he delivers his semiannual testimony on monetary policy to the Senate Banking Committee starting at 10 am ET.
Bernanke may also try to neutralize fears the Fed could curtail its asset purchase program, under which it purchases $85 billion in Treasurys and mortgage securities each month. In the minutes of the last two Fed meetings, there was clear discussion about the end of easing, and it was noted that some Fed members wanted an earlier end to quantitative easing. (CNBC Explains: Quantitative Easing)
"I think Bernanke's got a much trickier speech now," said Barry Knapp, head of equities portfolio strategy at Barclays. "Had the Italian elections gone as expected, he would reassure the market they weren't going to take away the punch bowl and you would have had a Bernanke bounce."
Bernanke is also likely to discuss the "sequester," automatic spending cuts due to kick in on March 1 if Congress does not reach agreement on how to prevent them. (CNBC Explains: Sequester)
Among earnings, Home Depot gained after the home improvement retailer posted results that topped expectations. The company also announced it would buy back as much as $17 billion of its own shares, and raise its dividend 35 percent to 39 cents from 29 cents a share. On Monday, rival Lowe's topped Wall Street expectations, with sales benefiting from rebuilding after Superstorm Sandy.
Macy's rose after the department store retailer reported quarterly results that exceeded Wall Street expectations.
Also on the economic front, the Commerce Department will release new home sales for January at 10 am ET. Economists in a Reuters survey forecast an annualized rise of 381,000 new sales, compared with 369,000 in December.
In addition, the Conference Board will release its consumer confidence index for February at 10 a.m.
The Treasury is scheduled to auction $35 billion in five-year notes on Tuesday, with results to be released in the afternoon.