By Manuela Badawy and Jeremy Gaunt NEW YORK/LONDON (Reuters) - World stocks tickedupward and the dollar fell broadly Tuesday as investorsbraced for a Federal Reserve meeting that may discuss whetherthe fragile U.S. economy needs a fresh infusion of cash. U.S. stocks faltered as the market pulled back after recentstrong gains, though upbeat housing data helped supportsentiment. U.S. government bond prices rose, supported by hopesthe Federal Reserve will retain, or even consider enhancing,its accommodative monetary stance. News that U.S. housing starts increased more than expectedin August to their highest level in four months, and thatpermits for future home construction also rose, promptedTreasuries to trim some of their early gains. "Bonds shaved some gains because the housing numbers werebetter than expected," said Gary Thayer, chief macrostrategistat Wells Fargo Advisors in St. Louis, Missouri. "Some signs ofstability in one of the more troubled sectors of the economycould mean that the Fed will decide today they don't need tobecome more accommodative." The focus of the day however, is the Fed's regular meeting.There was little expectation of any firm moves from thepolicymakers, but, as ever, the wording of their statementwould be key. At issue is how close the stumbling U.S. economy is torequiring the return of quantitative easing -- effectivelyprinting money to buy mortgage bonds and securities. The Fed is expected to tread water, with a renewed promiseto keep its portfolio from shrinking but no new steps to easeits monetary policy. The central bank acknowledged in August the U.S. recoveryhad lost momentum and Fed Chairman Ben Bernanke said it wouldrenew efforts to stimulate growth if the outlook souredappreciably. The Fed is expected to issue a statement at about2:15 p.m. EDT (1815 GMT). "The Fed is likely to keep neutral and when they do, themarket will move up. But it would need a lot more volume thanwhat we saw yesterday to see a jump above another technicalrange," said Tom Schrader, managing director of U.S. equitytrading at Stifel Nicolaus Capital in Baltimore. The Dow Jones industrial average was down 11.09points, or 0.10 percent, at 10,742.53. The Standard & Poor's500 Index was down 1.76 points, or 0.15 percent, at1,140.95. The Nasdaq Composite Index was down 6.51points, or 0.28 percent, at 2,349.32. World stocks as measured by MSCI were up0.04 percent while the pan-European FTSEurofirst 300 firmed0.06 percent. "Investors are waiting on the sidelines. Yesterday themarket went up in anticipation that the Fed can do somethingabout the economy, but I think people are ignoring themacroeconomic condition," said Koen De Leus, economist at KBCSecurities in Brussels. Earlier, Japan's Nikkei hit a seven-week intradayhigh of 9,704.25 but ended down 0.3 percent or 23.98 points at9,602.11. DOLLAR DOWN The euro was up half a percent at $1.3133, alsosupported by solid demand at euro zone debt sales in some ofthe troubled peripheral economies, some of which have beenlooking to be heading into crisis again. What had been increasing pressure on peripheral euro zonedebt eased, meanwhile, with an Irish bond auction goingsmoothly and a successful sale of Greek T-bills. Greece sold 390 million euros ($512 million) of 3-monthT-bills at an average yield of 3.98 percent, down from 4.05percent in a previous July 20 sale. Overseas investors bought72 percent, a sign of relative confidence. Ireland sold 1.5 billion euros in an auction of 2014 and2018 bonds, at the top of its target range. Yields -- 4.767percent and 6.023 percent respectively -- were well below thoseseen for the bonds on secondary markets on Monday. "Very strong auctions from Greece and Ireland. This alongwith the spread tightening we've seen this morning and thestrong bid-cover ratios means this funding round for Ireland,and Greece, has been passed convincingly," said Peter Chatwell,rate strategist at Credit Agricole in London. Against the Japanese yen, the dollar was down 0.39percent at 85.35 from a previous session close of 85.680. Meanwhile, U.S. Treasury debt prices were higher on hopesthe Fed will retain its accommodative monetary stance. The benchmark 10-year U.S. Treasury note was up7/32, with the yield at 2.6791 percent. The 2-year U.S.Treasury note was up /32, with the yield at 0.4601percent. The 30-year U.S. Treasury bond was up10/32, with the yield at 3.8536 percent. In energy and commodities prices, crude oil fell$1.03, or 1.38 percent, to $73.83 per barrel on concerns overthe outlook for the global economy and ahead of its expirylater on Tuesday. Spot gold prices fell $1.35, or 0.11percent to $1275.50 as the market consolidated after three daysof record highs. (Additional reporting by Ellen Freilich, Angela Moon andVivianne Rodrigues in New York, Editing by Chizu Nomiyama)

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