Dow dips, Nasdaq rises

NEW YORK (CNNMoney.com) -- Stocks struggled for direction late in a choppy session Tuesday as investors held back ahead of an expected interest rate cut from the Federal Reserve Wednesday.

The Dow Jones industrial average (Charts) and the S&P 500 (Charts) index both lost around 0.3 percent with about 30 minutes left in the session.

The Nasdaq composite (Charts) gained 0.3 percent, erasing earlier losses. Should the tech-heavy index end the session in positive territory, it would be at a new 2007 high and its highest close in nearly seven years - for the second session in a row.

A weak consumer confidence report, disappointment about Procter & Gamble's forecast and the resignation of Merrill Lynch's CEO were among the factors dragging on the session. Strength in technology and a drop in oil prices were among the positives.

Stocks rose last week and Monday as Fed hopes overshadowed record oil prices as high as $93 a barrel, and a weak dollar. After such a run, stocks pulled back Tuesday morning. But the tone improved a bit as the session wore on, thanks to select tech gainers, including Microsoft (Charts, Fortune 500), Apple (Charts, Fortune 500) and Google (Charts, Fortune 500).

"The market is waiting for the next shot in the arm and the Fed is likely to provide it tomorrow," said Georges Yared, chief investment strategist at Yared Investment Research.

Federal Reserve officials meeting Tuesday and Wednesday are expected to cut the fed funds rate, a key short-term interest rate, by a quarter-percentage point to 4.50 percent.

The Fed cut rates last month by a half-percentage point in an attempt to both loosen up the credit market and stop the housing market collapse from sending the broader economy into a recession.

It was the first rate cut in four years and at the time the bankers indicated that inflation fears had receded.

However, with oil prices near all-time records and gold prices near 26-year highs, concerns remain about pricing pressure and the strength of the consumer. Investors will be looking for the statement accompanying Wednesday's decision to address these issues, as well as other recent signs that economic growth continues to slow.

In economic news, the Conference Board's October consumer confidence index fell to its lowest level in two years, versus forecasts for it to hold steady. Separately, the S&P/Case-Shiller housing index showed U.S. home prices fell in August for the eighth consecutive month.

In corporate news, Merrill Lynch (Charts, Fortune 500) said Chairman and CEO Stanley O'Neal is retiring from the firm, as expected, one week after the brokerage said it lost $8 billion in the third quarter due to bad mortgage bets.

Merrill shares fell 2.5 percent and dragged on other financial stocks.

Procter & Gamble (Charts, Fortune 500) reported higher quarterly earnings that edged expectations, but issued a current-quarter outlook that disappointed some investors, sending the stock down 3.7 percent. (Full story).

Fellow Dow stock Boeing (Charts, Fortune 500) continued to rise on late Monday news that it is boosting its share buyback plan by $7 billion and that it is announcing a quarterly dividend of 35 cents per share.

ON Semiconductor (Charts) shares slumped 16 percent after the company reported lower third-quarter earnings that missed estimates and gave a fourth-quarter revenue forecast that is below analysts' estimates.

Around 61 percent of the S&P 500 September quarter earnings have been reported, with growth on track to have fallen 0.9 percent from a year ago, according to the latest Thomson Financial figures. That makes the quarter the weakest in at least five years.

Market breadth Tuesday was negative. On the New York Stock Exchange, losers beat winners 9 to 7 on volume of 920 million shares. On the Nasdaq, decliners topped advancers by 4 to 3 on volume of 1.74 billion shares.

U.S. light crude oil for December delivery fell $3.15 to settle at $90.38 a barrel on the New York Mercantile Exchange after settling at a record $93.53 a barrel Monday. Crude reached a record $93.80 during the session Monday.

COMEX gold for December delivery fell $4.80 to $787.80 an ounce.

A variety of stocks in the oil and metals sectors fell along with the price of the raw commodities, including Exxon Mobil (Charts, Fortune 500) and Alcoa (Charts, Fortune 500).

Treasury prices were little changed, with the yield on the benchmark 10-year note at 4.38 percent, little changed from late Monday. Bond prices and yields move in opposite directions.

In currency trading, the dollar slipped a bit versus the euro after falling to another all-time low against the European currency Monday. The dollar rose against the yen.