The market shifted its attention to the Federal Reserve after a series of disappointing economic and corporate headlines pushed stocks to a lower close on Tuesday.

Today's Market

The Dow Jones Industrial Average fell 34.93 points, or 0.29% to 11807.43, the Standard & Poor’s 500 index lost 3.71 points, or 0.28%, to 1314.29 and the Nasdaq Composite Index declined by 17.46 points, or 0.73%, to 2368.28. The consumer-friendly FOX 50 rose 0.18 points, or 0.02% to 917.54.

It was a back-and-forth session on Wall Street, with the market fluctuating between significant gains and losses. At the end of the day the Dow closed in the red for the sixth time out of the past seven sessions as traders wait for Wednesday's decision on interest rates from the Fed.

At its worst levels of the day, the blue-chip index crossed below its lowest closing level of the year, which was set in the days before the Bear Stearns collapse in March. However, the Dow recovered, closing above that 11,740 level.

Even with the lower close, about half of the 30 stocks on the Dow advanced on Tuesday, led by a 3% jump for drug maker Merck (MRK). Also, General Motors (GM) rebounded after it announced incentives to sell its 2008 models and price hikes for 2009. GM, which fell to its lowest level in 33 years on Monday, broke its string of six straight losing sessions. On the downside, Caterpillar (CAT) tumbled after it released plans to acquire a Brazilian manufacturer for an undisclosed amount. 

The market failed to rally on Tuesday as traders digested a pair of ugly economic reports that showed consumer sentiment and home prices deteriorated further in recent months, as well as disappointing corporate news. 

Shipping giant UPS (UPS) added to the string of recent bad news on Wall Street, cutting its second-quarter earnings forecast late Monday amid an "anemic" economy and an "unprecedented increase" in the cost of fuel. UPS now sees earnings from the current quarter well below its earlier forecast and not close to the Street's expectations. 

The move comes just a week after rival FedEx (FDX) missed the Street's earnings expectation and issued disappointing guidance. Both companies have been hurt by lower shipping demand and higher shipping costs. UPS and FedEx are considered barometers for the nation's economy. Shares of UPS fell more than 6% to five-year lows on Tuesday.  

Meanwhile, the Conference Board’s Consumer Confidence survey declined to 50.4 in June from 57.2 the month before. This marks the fifth lowest level for consumer confidence ever. The firm's expectations gauge slid to 41.0 -- the worst level on record. 

Confidence has been declining for much of this year as oil prices have spiked, credit has become more elusive and home values have diminished. Lower confidence can have a negative impact on consumer spending, which accounts for more than two-thirds of the nation's economy. 

Also, a new report showed home prices plunged by 15.3% in April from a year ago -- the largest drop since the S&P/Case-Shiller's inception in 2000. It also marks the first time that all 20 metro areas saw prices tumble. 

Much of Wall Street's attention has turned to the Federal Reserve's two-day policy meeting, which began Tuesday afternoon as scheduled. The Federal Open Market Committee is expected to keep interest rates steady even as inflation concerns have become a major worry for Wall Street. 

With the economy still teetering on the edge of a recession, most traders expect the Fed to wait to raise rights to fight inflation until later this year. Increasing interest rates now could have a negative impact on home sales and the overall economy. It would also be a sign that the Fed sees inflation as a more serious problem right now. 

Crude oil prices pulled back from a morning rally but still managed to squeak out some gains, closing at $137.00 a barrel, up 26 cents on the day. Oil futures have failed to retreat from near-record territory even after Saudi Arabia agreed to up its production. The energy market has been rattled by more worries of supply disruptions in Nigeria, which is producing oil at 25-year lows. 

Financial stocks provided the market with a bright spot on Tuesday as names like American Express (AXP), Citigroup (C) and UBS (UBS) posted notable gains. 

Corporate Movers

Microsoft (MSFT) is not in talks for a full buyout of Yahoo! (YHOO), sources familiar with the situation told FOXBusiness. Yahoo's stock took off earlier in the day, rising as much as 4%, after the Web site techcrunch.com reported that talks are back on between the two tech giants. Citing multiple unnamed sources, the site reported that full buyout talks are back on again and at a lower price than the previously offered $33 per share. 

Kroger (KR) beat the Street with a rise in earnings to 58 cents per share. Analysts polled by Thomson Reuters had only been looking for 58 cents in earnings from the grocer. Shares of Kroger rose more than 6% Tuesday on the results. 

Dow Chemical (DOW) hiked prices by 25% not even a month after the chemical giant announced a similar 20% increase. Citing the "relentless rise" in energy and raw material prices, Dow said the latest increases will take effect next month. Dow also said it plans to implement a surcharge of $300 per shipment on trucks and $600 a shipment on rail. 

KB Home (KBH) and other home builders soared on Tuesday after Credit Suisse began coverage of the sector with an “overweight” rating. The firm acknowledged that the market is hurting right now but predicted publicly traded home builders will strengthen as banks cut their ties to the sector. Credit Suisse also predicted inventory levels, which remain at historic highs, will peak in the spring of 2009 and begin to fall. The firm put an “outperform” rating on Pulte Homes (PHM), Toll Brothers (TOL) and others.

comScore (SCOR) fell almost 30% a day after The Wall Street Journal reported Google (GOOG) plans to enter the Internet measurement service. Such a move would be a direct threat to comScore, which offers a similar service. According to the Journal report, Google would be offering the Internet gauge for free to ad executives, unlike comScore’s product.

Citigroup (C) will be forced to write down between $6 billion and $10 billion, Credit Suisse reportedly wrote in a research note. The firm is also now forecasting that Citi will be forced to post a loss in the second quarter as well as for the full year, Dow Jones reported.

Washington Mutual's (WM) slumped 2% after Lehman Brothers slashed its price target on the bank to $10 from $27.25 and upped its full-year loss estimate to $3.91 per share. Lehman cited the ongoing fallout from the subprime debacle and the credit crunch. Lehman kept its "equal weight" rating on the stock. 

Eastman Kodak (EK) rose sharply after the company released plans to buy back up to $1 billion of its shares. The buyback announcement comes after Kodak received a $581 million tax refund from the Internal Revenue Service. The tax refund is also going to increase Kodak’s second-quarter earnings.

McKesson (MCK) may have to settle a lawsuit for more than $15 billion for allegedly inflating prescription drug prices, according to Bloomberg News report. The 2005 lawsuit filed by the New England Carpenters Health Benefits Fund, accuse McKesson of conspiring to inflate the costs of drugs. The penalties maybe higher because a U.S. District Judge certified the suits as class actions, meaning they can be tried under federal racketeering law, Bloomberg reported.

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, fell 22.81 points, or 0.67%, to 3404.52. The FTSE 100, London's benchmark index, lost 32.50 points, or 0.57%, to 5634.70.

On the continent, Paris's CAC 40 Index dropped 37.61 points, or 0.83%, to 4473.76 while Germany's DAX declined 53.40 points, or 0.81%, to 6536.06.

In Asia, Japan's benchmark Nikkei 225 Index fell 7.91 points, or 0.06%, to 13849.56. Hong Kong's Hang Seng Index declined 258.94 points, 1.14%, 22456.02.