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Wall Street up modestly as early rally fizzles

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks advanced modestly on Tuesday as an early rally faded after two top Republicans voiced support for U.S. President Barack Obama's call for limited strikes against Syria.

Both the S&P 500 and Nasdaq rallied to the tune of more than 1 percent in the early stages of trading after Obama decided to seek congressional authorization before taking military action, a move likely to shelve any strike for at least several days.

Both John Boehner, the Republican speaker of the U.S. House of Representatives, and Eric Cantor, the House Republican majority leader, pledged support for military action in Syria after a meeting on Tuesday at the White House. Boehner urged his colleagues in Congress to do the same.

Nancy Pelosi, Democratic leader in the House of Representatives, said she believes Congress will support a resolution authorizing the use of U.S. military force against Syria.

"The worry is Syria could turn ugly," said Jeffrey Saut, chief investment strategist at Raymond James Financial in St. Petersburg, Florida.

Equities have recently been pressured by the prospect of a Western strike against Syria after chemical weapons were used to kill civilians, sending the S&P down 1.8 percent last week and down 3.1 percent for August.

Congress returns from its summer recess on September 9, and any vote to authorize a strike will come after that.

U.S. crude futures rose 0.9 percent. Oil spiked 2.5 percent in August, largely driven by concerns that military action in the Middle East would disrupt crude supplies.

The Dow Jones industrial average fell 6.86 points or 0.05 percent, to 14,803.45, the S&P 500 gained 4.38 points or 0.27 percent, to 1,637.35 and the Nasdaq Composite added 17.409 points or 0.48 percent, to 3,607.278.

Verizon Communications agreed on Monday to pay $130 billion to buy Vodafone Group out of its U.S. wireless business, ending an often tense 14-year marriage. Verizon lost 2.7 percent to $46.10 while U.S. shares of Vodafone shed 2.3 percent to $31.61.

Nokia Corp agreed to sell its handset business to Microsoft Corp (NSQ:MSFT - News) for $7.2 billion, sending its U.S. shares up 29.7 percent to $5.06 on record volume. Microsoft fell 5.8 percent to $31.45, the biggest drag on both the Dow and S&P 500.

In the latest economic data, the Institute for Supply Management's August manufacturing index came in at 55.7, above expectations for a reading of 54. July construction spending rose 0.6 percent, twice the rate that had been expected.

In addition, financial data firm Markit said while its final U.S. Manufacturing Purchasing Managers Index eased to 53.1 from July's reading of 53.7, a pickup in new orders and a drop in inventories pointed to faster growth ahead.

In the S&P, investors were watching the 100-day moving average at 1,639.42, which the index has been unable to close above since August 26. Holding over that level would be a positive sign of near-term momentum.

CBS Corp on Monday reached an agreement with Time Warner Cable Inc to end a month-long blackout of its stations in New York, Los Angeles and Dallas. Financial terms of the deal were not disclosed. Shares of CBS rose 4.1 percent to $53.22 while Time Warner Cable added 1.1 percent to $108.58.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)