US STOCKS-Home Depot, strong housing data helps Wall St pare losses

* Home Depot (Swiss: HD.SW - news) , TJX hit record highs after results

* Wal-Mart falls after weaker-than-expected results

* July housing starts beat estimates; at near 8-year high

* Chinese stocks slump, yuan devaluations fears resurface

* Indexes: Dow down 0.06 pct, S&P up 0.02 pct, Nasdaq off 0.16 pct (Adds details, adds quote, updates prices)

By Tanya Agrawal

Aug 18 (Reuters) - U.S (Other OTC: UBGXF - news) . stocks erased most of their losses in late morning trading on Tuesday, as strong results from Home Depot and strong housing data helped offset a slump in Chinese shares and Wal-Mart's weaker-than-expected results.

Home Depot rose as much as 3.4 percent to a record high of $123.80 after the home improvement retailer's quarterly same-store sales increased more than expected.

The stock gave the biggest boost to the Dow and the S&P 500 and, along with TJX, led the consumer discretionary index to its fourth straight day of gains.

Home improvement companies and home builders are enjoying a spot in the sun from strong results and economic data.

Data on Tuesday showed U.S. housing starts rose to a near eight-year high in July. This followed a Monday report showing homebuilder sentiment in August rose to a near decade-high.

Housing stocks such as D.R. Horton, Toll Brothers (NYSE: TOL - news) , Lennar, PulteGroup (NYSE: PHM - news) and KB Home (NYSE: KBH - news) all rose between 1 and 3 percent following the data.

"The good data on housing is certainly helpful since its 4 percent of the U.S. GDP," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

"It (Other OTC: ITGL - news) 's something we know the Fed looks at relative to not only its impact on employment and things residual to the housing market but as well as to the wealth effect of homeowners."

At 10:59 a.m. ET (1459 GMT) the Dow Jones industrial average was down 9.92 points, or 0.06 percent, at 17,535.26. The biggest drag on the index was Wal-Mart, which fell as much as 3.3 percent to a nearly 2-1/2 year low of $69.55 after its weak results.

The S&P 500 was up 0.42 points, or 0.02 percent, at 2,102.86 and the Nasdaq composite was down 8.18 points, or 0.16 percent, at 5,083.52.

Even (Taiwan OTC: 6436.TWO - news) on the tech-heavy Nasdaq, the gains in consumer stocks such as Amazon.com (NasdaqGS: AMZN - news) , up 0.7 percent, on the index, helped lessen the impact of a slump in technology stocks.

Seven of the 10 major S&P sectors were lower, with the energy index's 0.48 percent fall leading the decliners.

U.S. oil prices and industrial metals, including copper, traded near six-year lows, amid worries over China's outlook.

Chinese stocks plunged again, reigniting fears that Beijing may be intent on a deeper devaluation of the yuan. A near 2 percent devaluation last week triggered an avalanche of selling by investors across the world who feared Beijing wanted to engineer a much sharper decline to support weak exports.

"The problem in China is that the markets haven't been released for free and open trading and until that happens there is going to continue to be downside pressure," said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.

In corporate news, TJX, jumped 6.7 percent to a lifetime high of $76.43 after it reported higher quarterly sales.

Declining issues outnumbered advancers on the NYSE by 1,773 to 1,093. On the Nasdaq, 1,564 issues fell and 981 advanced.

The S&P 500 index showed 36 new 52-week highs and eight new lows, while the Nasdaq recorded 53 new highs and 47 new lows. (Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza)