U.S. stocks reduced earlier gains on Tuesday as financial shares came under pressure after several companies announced stock offerings. Major indexes had been higher in morning action after better-than-anticipated housing data bolstered hopes that the recession is abating.

Declines among financial shares weighed on the broad market, due to fears about the diluting effect of banks' stock offerings, including Dow component JPMorgan Chase & Co , down more than 3 percent. The KBW bank index <.BKX> fell 2 percent.

Several U.S. banks are raising capital to show they are capable of functioning without government support, in a move to free themselves from tight regulations after they received billions of dollars from the Treasury Department's Troubled Asset Relief Program, or TARP.

There's been a lot of new issues on financials. They want to cover the TARP and they have issued a lot of stock in the last few days so I think that is why they are a little bit heavy, said Todd Leone, managing director at Cowen & Co in New York.

But we had a great move with the housing numbers this morning. We've had a nice move and I think the market is just kind of resting here.

JPMorgan Chase shares fell 3.4 percent to $34.89 and ranked among the biggest drags on the Dow industrials, while Morgan Stanley's stock slid 2.1 percent to $29.45.

The Dow Jones industrial average <.DJI> rose 2.45 points, or 0.03 percent, to 8,723.89. The Standard & Poor's 500 Index <.SPX> edged up 0.20 of a point, or 0.02 percent, to 943.07. The Nasdaq Composite Index <.IXIC> gained 3.10 points, or 0.17 percent, to 1,831.78.

The National Association of Realtors said its Pending Home Sales Index for April posted its largest monthly gain since 2001, the latest indication of a turnaround in the housing market, seen as essential for an economic recovery.

Shares of home builders increased after the data, as the Dow Jones U.S. home construction index <.DJUSHB> added 2.7 percent, led by gains in shares of DR Horton , up 4.1 percent to $9.63.

On Monday, the S&P 500 closed above its 200-day moving average for the first time since December 2007, a key technical breakthrough that some analysts believe is a harbinger of further gains.

(Additional reporting by Tenzin Pema; Editing by Jan Paschal)

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