Stocks dip with investors wary before Fed's rate decision

The Conference Board said its April reading on consumer confidence fell for the fourth straight month because of heightened concerns about soaring inflation and the weakening job market.

Consumers are not the only ones anxious about inflation Wall Street is worried that accelerating inflation could curtail consumer spending, which accounts for more than two-thirds of the U.S. economy. Rising costs are also of paramount concern to the Fed, which began a two-day policy meeting Tuesday.

The Fed is expected to cut interest rates by a quarter point on Wednesday, but then hold firm for a while. Policy makers face a difficult juggling act of trying to shore up the faltering economy without triggering inflation.

"There's no panic out there (in the market) because of the consumer confidence numbers, but there is more concern about inflation then we had just a few weeks ago," said Jim Herrick, director of equity trading at Baird & Co. "Everyone is interested in what the Fed will do about it."

In midafternoon trading, the Dow Jones industrial average fell 18.56, or 0.14 percent, to 12,853.19.

The biggest drag on the Dow was its component Merck & Co., which sank $4.17, or 10 percent, to $37.27 after saying the Food and Drug Administration refused to approve a new cholesterol drug, Cordaptive.

Broader markets also declined. The Standard & Poor's 500 index dipped 3.27, or 0.23 percent, to 1,393.10, and the Nasdaq composite index retreated 0.18, or 0.01 percent, to 2,424.22.

Bond prices edged higher as investors remained hesitant about equities. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.81 percent from 3.82 percent late Monday.

Oil prices fell amid expectations that a supply disruption in Britain would soon be resolved and as the U.S. dollar strengthened further against the euro. Light, sweet crude for June delivery fell $2.83 to $115.91 a barrel on the New York Mercantile Exchange.