* U.S. Housing starts fall to lowest levels in a year
* American Airlines shares up; oil prices fall
* Investors wait for Fed comments on rate hikes
* Indexes down: Dow 0.89 pct, S&P 0.61 pct, Nasdaq 0.35 pct (Updates to late morning, commentary)
By Sinead Carew
March 17 (Reuters) - U.S. stocks pulled back on Tuesday from a rally in the previous session ahead of a Federal Reserve meeting that investors hope will bring insight on the timing of an interest rate hike.
Investors held off on making big bets after the Federal Open Market Committee kicked off its meeting, which will be followed by a statement from Chair Janet Yellen Wednesday afternoon.
Most economists expect the Fed to remove a pledge to be "patient" about raising interest rates from its statement, giving it flexibility on when to kick off its first rate hike since 2006.
While higher rates would make Treasuries more attractive than many equities to some investors, the strong economic indicators that would lead to a rate rise may ultimately boost stocks.
"In front of the Fed meeting, people tend to do less. They tend to react to it rather than try to position in front of it," said Peter Cecchini, managing director and chief market strategist at Cantor Fitzgerald.
U.S. housing starts plunged to their lowest level in a year in February likely as harsh weather kept builders at home, in the latest indication the economy hit a soft patch in the first quarter.
The benchmark S&P 500 index on Monday had seen its biggest percentage gain since Feb. 3. Last week, the Dow and S&P registered their third week of losses.
At 11:05 a.m., the Dow Jones industrial average fell 160.33 points, or 0.89 percent, to 17,817.09, the S&P 500 lost 12.77 points, or 0.61 percent, to 2,068.42 and the Nasdaq Composite dropped 17.21 points, or 0.35 percent, to 4,912.30.
Materials were the weakest S&P sector with a 1.3 percent decline, led by Dupont, which was down 2.8 percent at $74.89.
Johnson & Johnson weighed most heavily on the S&P with a 1.3 percent decline to $99.78.
The energy sector was down 0.9 percent as oil prices fell with Brent crude down 2 percent to $52.84 a barrel and U.S. crude off 1.9 percent at $43.07 as concerns over a growing supply glut weighed on the market.
Shares in American Airlines rose 5.6 percent to 53.03 after an announcement that it would join the S&P 500.
Black Diamond Inc shares rose 28.5 percent to $9.08. The outdoor pursuits equipment and clothing company said it hired advisors to explore strategic alternatives and it reported quarterly results.
Declining issues outnumbered advancing ones on the NYSE by 1,968 to 915, for a 2.15-to-1 ratio; on the Nasdaq, 1,570 issues fell and 951 advanced, for a 1.65-to-1 ratio favoring decliners.
The S&P 500 was posting 14 new 52-week highs and 2 new lows; the Nasdaq Composite was recording 57 new highs and 47 new lows. (Reporting By Sinead Carew; Editing by W Simon and Nick Zieminski)