"Today should see another round of nervous trading," said Marc Pado, market strategist at Cantor Fitzgerald. "Expectations are still strong that the Fed does 25 basis points and then changes the language as to suggest that the rate cuts are over, for now."
The Dow Jones Industrial Average was down 30 points to 12,841, with 19 of its 30 components trading lower.
Shares of pharmaceutical giant Merck weighed on the Dow, losing 8.4% as the Food and Drug Administration rejected its cholesterol drug Cordaptive, one of the key drugs in its pipeline.
Steve Scala, an analyst at Cowen & Co., called the FDA ruling a major disappointment and said it may hurt Eli Lilly as well, as it has a similar drug in the pipeline.
The S&P 500 index fell 1.9 points to stand at 1,394 in late morning trade, while the Nasdaq Composite lost 2 points to 2,422.
The energy and materials segments were weighing on the broader market, pressured by a firmer dollar. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies.
The dollar index, which measures the U.S. currency against a basket of major rivals, was up 0.2% at 72.73. Crude-oil futures fell nearly $2 to $116.73 a barrel.
On Wednesday, the market will digest both the Fed's decision and first-quarter gross domestic product data.
Futures markets and many economists now anticipate the Fed will cut rates by a quarter percentage point, to 2%, and could then put rate actions on hold for several months.
First-quarter gross domestic product data may reveal the economy has shrunk this year. Economists polled by MarketWatch are anticipating a meager 0.2% rise.
In the meantime, stocks showed little immediate reaction to a report showing U.S. consumer confidence fell in April, perpetuating a downward slide as inflation expectations rose to match the record high reached after Hurricane Katrina.
The Conference Board said its April consumer confidence index fell to 62.3 from a March reading that was revised upward to 65.9. Consumer confidence is at its lowest since March 2003. Economists surveyed by MarketWatch had expected an April reading of 61.0.
Corning shares rose 2.4% as the group said its first-quarter profit tripled on LCD sales.
Office Depot rose 10% after topping first-quarter analyst estimates.
MasterCard climbed 9.9% after more than doubling its profit on a 29% revenue rise.
According to a report in The Wall Street Journal, the Federal Reserve and two other regulators plan to propose strict policies on credit-card issuers.
Oil giants BP and Royal Dutch Shell each beat analyst estimates by about $1 billion on their way to reporting rises in first-quarter profit.
By Nick Godt