Stocks slide ahead of Fed

NEW YORK (CNNMoney.com) -- Stocks slipped Tuesday morning as investors stepped back ahead of an expected quarter-percentage point interest rate cut from the Federal Reserve Wednesday.

A weaker-than-expected consumer confidence report and news that Merrill Lynch's CEO has stepped down added to the early weakness.

The Dow Jones industrial average (Charts) and the S&P 500 (Charts) index both lost 0.3 percent in the early going. The Nasdaq composite (Charts) was barely lower after having ended the previous session at a new 2007 high, its highest close in nearly seven years.

Stocks gained Monday, as Fed hopes distracted investors from record oil prices above $93 a barrel and another record low for the dollar versus the euro.

But the advance didn't extend into Tuesday morning, even as oil prices dropped and the dollar recovered a bit.

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 to 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 up around $93 a barrel 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 the economic growth continues to slow.

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 percent and dragged on other financial stocks.

In other news, Procter & Gamble (Charts, Fortune 500) reported higher quarterly earnings that edged expectations, but issued a current-quarter outlook that disappointed some investors, weighing on shares. (Full story).

The Conference Board's consumer confidence index released Tuesday morning fell in October to its lowest level in two years. Economists though the index would hold steady.

U.S. light crude oil for December delivery fell $1.28 to $92.25 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 $7.10 to $785.50 an ounce.

Treasury prices inched lower, with the yield on the benchmark 10-year note at 4.39 percent, up from 4.38 percent late Monday. Bond prices and yields move in opposite directions.

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