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The blue chips fell while the Nasdaq edged higher as Wall Street searched for direction on Tuesday.
As of 12:26 p.m. ET, the Dow Jones Industrial Average fell 28.5 points, or 0.26%, to 11,033, the S&P 500 gained 1.9 points, or 0.17%, to 1,164 and the Nasdaq Composite rose 14.6 points, or 0.59%, to 2,510.
The industrial sector performed the best by a considerably margin on Tuesday, with Caterpillar (NYSE:CAT) and General Electric (NYSE:GE) leading the Dow higher. Utilities like Consolidated Edison (NYSE:ED), however, lagged behind significantly.
Wall Street has been fixated on the euro zone sovereign debt crisis in recent weeks, with single headlines often causing substantial swings. In fact, the Dow made a stunning recovery in the last half hour of trading on Monday on a report by the Financial Times that Chinese officials were mulling investing in beleaguered Italian bonds.
Italy is Europe's third-largest economy, but it is highly indebted, and has seen its borrowing costs spike amid worries the government will have trouble servicing its debt as the global economy weakens. A spokesperson for the Italian government confirmed a meeting with Bejing, according to Reuters, but failed to comment on the substance of the meeting.
"Markets are tired of talk and rumour on how to get Europe back on its feet and are still waiting for concrete results," Ben Critchley, a Sales Trader at IG Index, a London-based trading firm, wrote in a research note.
Meanwhile, there were also growing concerns that Greece may default on its debt as its deepening recession has put much-needed rescue aid from the European Union in peril. In fact, the cost of insuring Greek debt against a default soared.
French banks including BNP Paribas, Societe Generale and Credit Agricole, which have a particularly high exposure to Greek debt, have been pummeled as a result of the uncertainty.
In currencies, the euro fell 0.2% against the U.S. dollar, while the greenback fell 0.15% against a basket of world currencies.
The economic calendar for the first two days of the week has been fairly light, with only two releases on tap for Tuesday. U.S. import prices fell 0.4%, a smaller fall than the 0.8% economists anticipated, while export prices rose 0.5% compared with forecasts of no change. On a year-over-year basis, import prices have soared 13%, while export prices have jumped 9.6%.
Markets are expected to get fresh data on the Federal budget deficit later in the day.
Energy markets were in the green despite a higher dollar. Light, sweet crude gained $1.16, or 1.4%, to $89.38 a barrel. Wholesale RBOB gasoline climbed a penny to $2.75 a gallon.
Prices at the pump fell slightly overnight. A gallon of regular costs $3.64 on average nationwide, up from $3.60 last month, and well higher than the $2.71 drivers paid last year.
In metals, gold rose $12.60, or 0.69%, to $1,826 a troy ounce.
Best Buy (NYSE:BBY) boosted its fiscal-year 2012 earnings forecast to $3.35 to $3.65 a share, from $3.30 to $3.55. The technology retailer also saw its second-quarter profit fall 22% to 47 cents from 60 cents last year, missing analysts expectations of 53 cents.
News Corp. (NASDAQ:NWSA) Deputy Chief Operating Officer James Murdoch is being recalled to the U.K. House of Commons Culture Committee for testimony regarding the phone-hacking scandal at the now defunct News of the World. News Corp. is the parent company of FOX Business Network and FOXBusiness.com.
The English FTSE 100 was unchanged at 5,130, the French CAC 40 fell 0.22% to 2,849 and the German DAX climbed 0.82% to 5,114.
In Asia, the Japanese Nikkei 225 jumped 0.95% to 8,617 and Chinese markets were closed for the day after the Mid-Autumn festival.