"All eyes on today's FOMC [Federal Open Market Committee] decision," said Tom DiGaloma, head of U.S. Treasury trading at Jefferies & Co.
After posting modest gains early on, the Dow Jones Industrial Average was down 11.9 points midmorning at 13,715.1.
The S&P 500 fell 0.8 points to 1,515.16, while the Nasdaq Composite climbed 4.88 points to 2,723.83.
On the New York Mercantile Exchange, crude-oil futures rose 86 cents to $88.72 a barrel, while gold futures gained 20 cents to $813.7 an ounce.
Economists are looking for a rate cut of at lease a quarter of a percentage point, if not half a point, when the Fed announces its decision later Tuesday at 2:15 p.m. Eastern time. Also important will be the Fed's wording, with the central bank expected to leave room for further easing. .
Shortly after the opening bell, the Commerce Department reported U.S. wholesalers worked down their inventories in October, with inventory totals falling to their lowest level yet in relation to sales. .
AT&T was up 5.4% after the telecommunications giant said it's increasing its dividend by 13% and buying back 400 million shares.
Blue-chip Boeing Co. said late Monday it was increasing its quarterly dividend payment by 14% to 40 cents a share.
Texas Instruments shares jumped in pre-open trade after the chipmaker lifted the low end of its earnings and revenue outlook, though it also shaved the top end of its revenue outlook. Strength in demand for chips to power notebooks offset weakness in wireless, the firm said.
Shares of H&R Block Inc. fell after the nation's largest tax preparer forecast a wider second-quarter loss as it winds down its troubled subprime-mortgage operations.
Washington Mutual shares fell 9.9% after the lender said it would exit the subprime lending business and cut 3,150 jobs. It also plans to slash its dividend and sell $2.5 billion in convertible preferred stocks.
European shares edged lower, paced by a decline in the property sector as investors fretted about tightening credit market conditions, even amid expectations of an imminent rate cut out of the United States. .
By Kate Gibson