Wall St flat as banks offset rate worries

NEW YORK (Reuters) - Stocks were little changed on Tuesday as the financial sector got a lift from brokers' comments on banks, which offset investors' worries about the impact of rising Treasury yields.

Investors also appeared reluctant to make any large moves ahead of the Federal Reserve's release of minutes from its March 16 policy-setting meeting, when the Federal Open Market Committee reiterated its intention to keep interest rates ultra low for an "extended period." The minutes are expected to be released at around 2 p.m. (1800 GMT).

Signs of an improving U.S. economy have driven stocks higher in the past week, with the Dow industrials edging close to 11,000. At the same time, Treasury debt prices have fallen, with the benchmark 10-year note's yield climbing to touch 4 percent for the first time in 10 months, triggering concerns about the impact of rising rates on the housing sector.

Home builders' stocks slid as the rising Treasury yields stirred the specter of higher mortgage rates, which would make homes less affordable. Shares of KB Home , one of the top five U.S. home builders, fell 2.7 percent to $16.54 after Credit Suisse cut its rating on the company's stock to "neutral" from "outperform."

The Dow Jones U.S. home construction index <.DJUSHB> dropped 1.5 percent.

"That move that we've seen (in Treasury yields) is partly a sign of recovery, higher yields reflecting a stronger pace of real economic growth," said Jeff Kleintop, chief market strategist at LPL Financial in Boston.

"But accompanying higher mortgage rates threaten to stall the fledging housing market recovery we've seen, and make financing the budget deficit more costly."

The Dow Jones industrial average <.DJI> dropped 14.74 points, or 0.13 percent, to 10,958.81. The Standard & Poor's 500 Index <.SPX> edged up 0.20 of a point, or 0.02 percent, to 1,187.64. The Nasdaq Composite Index <.IXIC> rose 3.41 points, or 0.15 percent, to 2,432.94.

The 10-year Treasury note's yield has risen about 30 basis points over a two-week period, reaching 4 percent in intraday trade on Monday, although it finished at 3.99 percent.

The Nasdaq got major support from Amazon.com , up 3.1 percent at $135.50. The launch on Saturday of Apple Inc's iPad has stirred some optimism the device could help expand the market for e-publishing, which has been led by Amazon.com's Kindle.

Among major stocks limiting the Dow's decline was aluminum producer Alcoa Inc , up 2.2 percent at $15.05. The Dow component reports earnings next week.

Rising bank shares buoyed the S&P 500, as Wells Fargo Securities raised its recommendation on large-cap U.S. banks by a notch to "market weight," citing positive economic data, and Credit Suisse increased its price target on the stocks of two smaller banking companies, Regions Financial Corp and Synovus Financial Corp .

Regions Financial shares gained 5.7 percent to $8.66, while Synovus Financial shares advanced 4.1 percent to $3.55.

The KBW regional banks index <.KRX> added 2.7 percent, after touching a fresh 52-week intraday high at 55.70.

The broader KBW bank index <.BKX> rose 2.1 percent. It also hit a fresh 52-week high intraday at 54.72.

An explosion at a West Virginia coal mine owned by Massey Energy killed at least 25 miners in the deadliest U.S. mining disaster since 1984. Massey's stock slid 10.5 percent to $48.94.

Another drag on the market was concern about Greece finances.

A Greek finance ministry source denied a Market News International report that Greece's government wants to bypass an International Monetary Fund financial safety net proposal on concerns that the IMF could impose tough conditions. But investors battered Greek assets both before and after the denial.

An index of Greek bank stocks <.FTATBNK> fell 4.1 percent, but the FTSEurofirst 300 <.FTEU3> index of top shares rose 0.67 percent.

(Reporting by Rodrigo Campos; Editing by Jan Paschal)

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