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The justices seemed sympathetic to Wal-Mart in considering whether a small group of women who began the lawsuit against the world's largest retailer 10 years ago can represent a huge nationwide class.

Justice Anthony Kennedy, a moderate conservative who often casts the decisive vote on the nine-member court, said, "I'm just not sure what the unlawful policy is."

Potentially liability could reach billions of dollars.

Even if Wal-Mart loses at the Supreme Court and then at trial, financial analysts said the Bentonville, Arkansas-based company has more than enough cash to make a big payout with little impact on its profits.

A crowd of protesters gathered outside the court, shouting "Fair pay now" and carrying signs such as "Stop discounting the women of Wal-Mart" and "The women of Wal-Mart are not worthless."

Chris Kwapnoski, a 24-year Wal-Mart employee and one of the named plaintiffs in the case, told reporters after the arguments, "We're not going to lose."

She recalled being told by a manager to "brush the cobwebs off" and "doll up" if she wanted advancement.

"Wal-Mart is trying their level best to keep us out of court so the facts will not be presented to the public at large or before a sitting jury," said Betty Dukes, a Wal-Mart employee in Pittsburg, California, who first filed a law suit against the retailer in 2001.

The court is likely to make a ruling by late June. The decision could change the legal landscape for workplace and other class-action lawsuits, affecting a similar case against Costco Wholesale Corp.

JUSTICE SCALIA: "IS THIS REALLY DUE PROCESS?

Businesses say a Wal-Mart defeat could make every large corporation vulnerable to sweeping allegations of employment bias and would water down class-action requirements.

The Supreme Court is only deciding whether the lawsuit can go to trial as a group. If the court rejects the class-action status, the individual women still can sue, both sides in the case say.

Large class-action lawsuits make it easier for big groups of plaintiffs to sue corporations and they have led to huge payouts by tobacco, oil and food companies.

During the session, some justices strongly questioned the women's arguments.

The S&P/Case-Shiller composite index of 20 metropolitan areas declined 0.2 percent in January from December on a seasonally adjusted basis where a Reuters poll of economists forecast a drop of 0.4 percent. Prices in the 20 cities have fallen 3.1 percent year-over-year compared to 3.2 percent expected.

"The housing market recession is not yet over," said David Blitzer, chairman of the index committee at S&P. "At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing."

Eleven of the 20 cities fell to the lowest levels since home prices peaked in 2006 and 2007, while the overall index was just 1.1 percent above the April 2009 low, the report showed.

Unadjusted for seasonal impact, home prices fell 1.0 percent for the month. Only San Diego and Washington, D.C. showed annual price increases.

The Case-Shiller index lags data from the National Association of Realtors, which reported earlier this month U.S. that the median U.S. home price had hit a nine year low in February as home sales volumes plunged 9.6 percent.

In a separate report, the realtors group on Monday said contracts for sales of previously owned U.S. homes rose 2.1 percent in February after two straight declines.

The pending contracts data leads existing home sales by a month or two and suggests some of the recent weakness was due to unusually severe winter weather.

(Reporting by Corbett B. Daly; Editing by Padraic Cassidy)

Such issues include the turmoil in the Middle East and North Africa, the aftermath of the Japanese tsunami, the European sovereign debt crisis and the U.S. fiscal situation and possibility of a government shutdown, Bullard said in prepared statements ahead of a speech in the Czech capital.

"The process of normalizing policy, even once it begins, will still leave unprecedented policy accommodation on the table," said Bullard, who is not a voting member of the Fed's policy setting panel this year.

"The FOMC may not be willing or able to wait until all global uncertainties are resolved to begin normalizing policy," he added, referring to the policymaking Federal Open Market Committee.

Still, he added that the most likely prospect was that the four main risks would be resolved "without becoming global macroeconomic shocks."

Bullard, seen as a centrist on the spectrum of supporters and opponents of aggressive Fed actions to boost the economy, said that U.S. growth prospects had improved since last summer and that an improving economy 18 months post-recession was a "strong positive."

He said on Saturday that the Fed should consider trimming its $600 billion bond purchase programme given solid U.S. economic data.

On Monday, top Fed officials said the U.S. economy still needed support from the Fed's bond buying programme, with some suggesting recent spikes in gas and food price are likely to be short-lived.

The Fed, which has kept short-term rates near zero since December 2008, has been buying U.S. Treasuries since November to push down longer-term borrowing costs and keep the U.S. recovery on track. The program is slated to end in June.

In his Prague remarks, Bullard said monetary policy could not remain ultra-accommodative indefinitely.

"Discussion of the normalization of U.S. policy will likely return as the key issue in 2011," Bullard said.

(Reporting by Jan Lopatka; writing by Michael Winfrey and Jason Hovet; Editing by Hugh Lawson)

Japan's Nikkei index .N225 was down about 0.3 percent in late trading after falling as much as 1.5 percent earlier.

Early price-drops enticed bargain-minded investors who feel stocks are undervalued and poised to rise after Thursday's end of first quarter and the close of the Japanese fiscal year, analysts said.

"Some investors concluded now it's an opportunity to pick up some shares," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. "The broad trend is up and dips are being bought."

Stocks fell initially following Monday's losses on Wall Street and news that plutonium was found in soil at the earthquake-stricken Fukushima nuclear plant.

Heightening the uncertainty for investors, some Japanese companies said there would be delays in reporting full-year financial results as they assessed the damage from the devastating quake and tsunami which hit the country's northeast on March 11, and the impact of widespread power outages which are still preventing many firms from restarting production lines.

Shortages of key components made in Japan have forced some manufacturers, particularly auto makers, to cut back production in North America, Europe and parts of Asia.

MSCI's index of Asian shares outside Japan .MIAPJ0000PUS rose 0.37 percent after slipping 0.06 percent earlier. Australia's S&P/ASX 200 indexed gained 0.47 percent to 4755.80.

In Japan, shares of Fukushima's operator Tokyo Electric Power (TEPCO) (9501.T) were untraded on a flood of sell orders on a newspaper report. The Yomiuri paper citing unidentified government sources as saying there was talk about temporarily nationalizing the utility, which a top Japanese official denied.

"TEPCO is the ground zero of the problem," said Adrian Foster, head of financial markets research Asia-Pacific at Rabobank International in Hong Kong. "This is disproportionately a Japan issue."

A tepid session on Wall Street overnight reinforced investors' aversion to piling back into riskier assets. Data showed U.S. consumers increased spending in February but much of the gain went to cover rising food and energy costs, giving the economy only a modest lift. .N

EURO FINDS FOOTING

In currency markets, the euro stabilized after ECB chief Jean-Claude Trichet said inflation in the euro zone was "durably" above the central bank's target, reinforcing the view it will raise interest rates early next month. The move would boost the value of the single currency and returns on euro-denominated investments.

Still, the euro remained under pressure because of

the region's festering sovereign debt problems and uncertainties stemming from Sunday's loss of a key state election by Germany's ruling party.