Wall Street flat, paring losses on Greece hopes

NEW YORK (Reuters) - U.S. stocks were flat on Tuesday, paring modest early losses and putting the S&P 500 back near record levels as optimism grew that a debt deal would be reached with Greece.

A source told Reuters that Greece intends to ask for an extension of a loan agreement tomorrow. The report follows a collapse of deal negotiations on Monday, which led to European Union finance ministers pressuring the country to remain in an international financial rescue program. U.S.-listed shares of the National Bank of Greece fell 8.7 percent to $1.47.

The news was viewed as another sign of progress, building on the recent optimism that contributed to major indexes notching a second straight week of solid gains last week.

Despite that, investors continued to monitor the situation cautiously, while a fragile Ukraine truce added to the market's uncertainty.

"While there is concern, and it has become in vogue to say that stocks are expensive, it is hard to say what they're expensive relative to," said Liam Dalton, president of Axiom Capital Management in New York. "Cash remains abundant and interest rates are low, and we should generally go up in an environment like that."

In eastern Ukraine, Pro-Russian rebels and government forces fought street-to-street in a strategic town and refused to pull back their heavy guns.

While the United States has little direct exposure to Greece, Ukraine or Russia, any breakdown in either place could lead to continued volatility in Europe, a major trading partner.

Energy <.SPNY> was among the biggest decliners of the day, falling 0.5 percent alongside a drop in crude oil , which sank 2 percent after earlier rising as much as 1.7 percent.

"We think oil is likely to have stabilized, but we don't see meaningful upside in the next six months," said Dalton, who oversees about $2.2 billion in assets.

Transocean Ltd fell 0.5 percent to $18.96 a day after the company slashed its dividend and said its chief executive stepped down.

Medtronic Plc added 3.4 percent to $77.83 after reporting better-than-expected earnings growth, boosted by higher sales of its cardiac devices.

On the downside, Celsus Therapeutics plummeted 81 percent to $1.20 after the company's lead drug failed a mid-stage study. VBL Therapeutics Inc dropped 62 percent to $5.32 after it said it would stop developing its experimental inflammatory drug to fight ulcerative colitis and psoriasis.

The Dow Jones industrial average <.DJI> fell 3.3 points, or 0.02 percent, to 18,016.05, the S&P 500 <.SPX> lost 0.36 points, or 0.02 percent, to 2,096.63 and the Nasdaq Composite <.IXIC> dropped 0.14 points, or -0 percent, to 4,893.70.

Declining issues outnumbered advancing ones on the NYSE 1,586 to 1,431, for a 1.11-to-1 ratio; on the Nasdaq, 1,435 issues rose and 1,215 fell for a 1.18-to-1 ratio favoring advancers.

The S&P 500 was posting 54 new 52-week highs and 2 new lows; the Nasdaq Composite was recording 99 new highs and 18 new lows.

(Editing by Nick Zieminski)

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