Wall Street falters after home sales data

Home sales fell 2.2 percent month over month, defying expectations for a 5.5 percent gain. Sales were expected to rise because of a June 30 deadline for home owners to close contracts to receive a tax credit.

It was generally expected that sales would be up given earlier contract signings because of the tax credit, so it is a little surprising, said Paul Kasriel, senior vice president at Northern Trust in Chicago.

It's going to be a two step forward, one step backward housing recovery.

Shares of Walgreen Co slid 6 percent to $28.33 after the drugstore chain reported a weaker-than-expected profit as sales of nonprescription items disappointed.

The Dow Jones industrial average <.DJI> dipped 11.34 points, or 0.11 percent, to 10,431.07. The Standard & Poor's 500 Index <.SPX> was off 2.45 points, or 0.22 percent, to 1,110.75. The Nasdaq Composite Index <.IXIC> added 2.26 points, or 0.10 percent, to 2,291.35.

The Nasdaq fared better than the other two main indexes, boosted by shares of chipmakers. Sandisk Corp rose 0.3 percent to $48.18.

The Federal Reserve's rate-setting committee was also starting a two-day meeting, with a statement to be released on Wednesday. Investors will watch for any minor changes in language that could illustrate the central bank's outlook on the economy.

(Additional reporting by Ryan Vlastelica; Editing by Padraic Cassidy)