Wall St flat as Italian government teeters

By Chuck Mikolajczak

NEW YORK | Tue Nov 8, 2011 10:47am EST

(Reuters) - Stocks were little changed in volatile trade on Tuesday as Italy's government teetered on the brink in the latest turn in the long-simmering euro zone sovereign debt crisis.

Prime Minister Silvio Berlusconi appeared to lose his parliamentary majority after a key vote, piling further pressure on him to resign.

Berlusconi won a vote on the ratification of the country's debt-weighed public finances because the opposition abstained. But he obtained only 308 votes, below the 316 needed for an absolute majority in the 630-seat Chamber of Deputies.

"There is not a lot to focus on in terms of fundamentals, so we are still trapped in this headline box, if you will, and every movement seems to be based on that," said Kevin Kruszenski, director of equity trading at KeyBanc Capital Markets in Cleveland.

"Maybe it is just another nail in the coffin of the entire euro crisis, slowly but surely it seems to be sort of unfolding and progress is being made."

The PHLX Europe sector index .XEX, which includes major European shares, advanced 0.6 percent.

Italian 10-year borrowing costs touched a new record of 6.74 percent, raising the risk that Rome's massive debt -- the second highest in Europe at 120 percent of gross domestic product -- could spiral out of control.

The Dow Jones industrial average .DJI was down 1.74 points, or 0.01 percent, at 12,066.65. The Standard & Poor's 500 Index .SPX was up 1.96 points, or 0.16 percent, at 1,263.08. The Nasdaq Composite Index .IXIC added 6.68 points, or 0.25 percent, at 2,701.93.

With little on the U.S. economic calendar this week and earnings season drawing to a close, investors were fixed on Europe. According to Thomson Reuters data, of the 442 S&P 500 companies that have reported earnings, 70 percent topped expectations.

U.S. markets have been closely tied to the fortunes of the euro while volatility has been tethered to sovereign debt. The euro hit a session high against the dollar ahead of the Italian vote.

Activision Blizzard Inc (ATVI.O) advanced 1 percent to $13.88 as the video-game maker began selling the highly anticipated new entry in its "Call of Duty" series.

(Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)