NEW YORK (CNNMoney)
The Dow Jones industrial average, S&P 500 and Nasdaq all rose 0.3% in the early going.
Investors were encouraged by a report from the U.S. Census Bureau that showed housing starts rose 0.8% in February, while building permits jumped 4.6%. Building permit data is considered a proxy of builder confidence. Shares of homebuilders Lennar (LEN), Toll Brothers (TOL) and Hovnanian (HOV) rose about 2%.
Despite the good news at home, investors continued to keep a wary eye on Cyprus. The heavily indebted nation has been in the spotlight since the weekend, as the European Union has been trying to impose a one-time tax on bank deposits as part of a €10 billion bailout package.
Lawmakers in Cyprus are scheduled to vote later Tuesday on the controversial measure.
Related: Eurozone's risky strategy
"We believe the [EU] decision on Cyprus was a dangerous move, with the potential to have knock-on effects elsewhere," wrote Gizem Kara and analyst co-authors from BNP Paribas, in a research note. "Although the immediate impact may be contained if the decision is deemed to be unique in Cyprus, due to its special circumstances, a precedent has been set."
Investors are worried that financial turmoil stemming from Cyrpus could spread to Russia, Europe and even Wall Street.
U.S. stocks fell for the second day in a row Monday amid concerns about developments in Cyprus.
Still, U.S. stocks have had a good run. Just last week, the Dow snapped a 10-day winning streak, which included eight straight days of record highs. And the S&P 500 is less than 1% away from its all-time closing high. All three major indexes are still up between 7% to 10% for the year so far, fueled by ongoing stimulus from the Federal Reserve and signs that the economy is well on its way to a full recovery.
Related: Cyprus just a 'hiccup' for stock rally
In corporate news, shares of Canadian athletic apparel maker Lululemon Athletica (LULU) tumbled after the company announced a recall of yoga pants that were unintentionally see-through.
Shoe retailer DSW (DSW) missed revenue forecasts and issued cautious guidance about sales, prompting the company's stock to plunge.
Electronic Arts Inc (EA) shares declined after the company announced its chief executive was resigning. EA also said its revenue and earnings would be at the low end or below its January guidance.
Related: Fear & Greed Index: Sliding into greed
European markets were mixed in midday trading. Asian markets also ended on either side of the breakeven line.
The ZEW Indicator, a measure of economic sentiment in Germany, notched up in March but was muted by Cyprus uncertainty and political turmoil in Italy.
The U.S. dollar gained against the euro, which was trading at $1.29.The dollar also
"Capital flight is the most immediate concern," wrote Caxton FX analyst Richard Driver. "People will be loath to park their funds in euros if risks like these [Cyprus] taxes exist. Reassurances have been made that the Cypriot scenario is unique but there is no way people can be sure that this is the case."
The dollar also rose versus the Japanese yen, but declined versus the British pound.
Oil and gold prices were little changed.
The price on the 10-year Treasury rose, with the yield falling to 1.94% from 1.96% late Monday.
First Published: March 19, 2013: 9:50 AM ET
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