By Chuck Mikolajczak

NEW YORK (Reuters) -U.S. stocks were little changed on Tuesday, giving up earlier gains that had vaulted the S&P 500 and Dow Industrial Average to record highs as investors braced for the Federal Reserve interest-rate decision.

The benchmark S&P 500 index touched 5,670.81 earlier in the session, after fresh economic data eased worries of a sharp slowdown in the U.S. economy.

The latest report from the U.S. Commerce Department showed retail sales rose unexpectedly in August, after a decline in auto dealership receipts was offset by strength in online purchases, suggesting the economy was on solid footing through most of the third quarter.

"The retail sales numbers this morning (were) maybe a little bit of an upside surprise, but still indicative of a bit of a slowdown in the pace of consumer spending," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Southfield, Michigan.

"Clearly the Fed's story tomorrow is really the dominant

story and we've gone from what seemed to be a predominant view

that 25 basis points was going to be the decision to one that

increasingly looks like a larger (interest-rate) cut could be in the offing."

Markets are pricing in a 63% chance the Fed will cut borrowing costs by 50 bps at the conclusion of its two-day meeting on Wednesday, according to the CME's FedWatch Tool. Market expectations on the cut's size have been volatile in recent days, with only a 34% chance of a 50-bps cut priced in as of last week.

Microsoft was the biggest lift to the S&P 500, with a 0.93% rise after the AI frontrunner's board approved a new $60-billion share-buyback program and hiked its quarterly dividend by 10%.

The Dow Jones Industrial Average fell 31.14 points, or 0.07%, to 41,592.72, the S&P 500 lost 2.48 points, or 0.04%, to 5,630.61 and the Nasdaq Composite gained 19.58 points, or 0.11%, to 17,611.71.

The blue-chip Dow hit a record high for a second-straight day. The Russell 2000 index tracking small caps, which investors view as likely to benefit from a lower rate, outperformed with a 0.84% rise.

Energy, up 1.31%, was the best-performing of the 11 major S&P sectors, buoyed by a climb in crude prices, while healthcare was the worst-performing with a drop of 1.08%.

Among other movers, Intel gained 2.92% after signing Amazon.com's cloud-services unit as a customer to make custom artificial-intelligence chips. Amazon.com advanced 1.19%.

Advancing issues outnumbered decliners by a 1.6-to-1 ratio on the New York Stock Exchange and on the Nasdaq, advancing issues outnumbered decliners by a 1.36-to-1 ratio.

The S&P 500 posted 48 52-week highs and no new lows while the Nasdaq Composite recorded 135 new highs and 59 new lows.

(Reporting by Chuck Mikolajczak; Editing by Rod Nickel)