(Updates to 10:52 EDT) The S&P 500 backed down from the...

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    (Updates to 10:52 EDT)

    The S&P 500 backed down from the previous day's record closing high while the dollar gained strength on Tuesday, as investors turned a cautious eye to upcoming inflation data and the U.S. Federal Reserve's policy meeting.

    The Dow Jones Industrial Average joined the S&P 500 in negative territory, while the tech-heavy Nasdaq was last modestly green as Fed policy makers prepared to convene for their two-day policy meeting.

    "Ahead of the Fed the market is fairly certain there will be no rate cut," said Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management in Seattle. "But in the wake of the European Central Bank and the Bank of Canada cutting rates last week, the market is looking for clarity as to the timing."

    While financial markets expect no change to the Fed funds target rate, the Federal Open Markets Committee (FOMC) is expected to release its Summary of Economic Projections, which should help to illuminate the central bank's forward policy path.

    The data-reliant Fed will pay close attention to the Labor Department's Consumer Price Index (CPI) data due early Wednesday, which is expected to show inflation remains on its meandering path down to the central bank's 2% annual target.

    French President Emanuel Macron's announcement that he will call a flash election continues to reverberate across markets, adding fuel to the fire of what has been a tumultuous year in geopolitics, which has boosted the dollar.

    "In 2024 a lot of the world has seen political uncertainty," Haworth said. "Pile the flash elections in France and England on top of what's happening in India, change of leadership in Mexico, there have been a lot of uncertainties and that tends to benefit the flight-to-safety currencies."

    The Dow Jones Industrial Average .DJI fell 205.11 points, or 0.53%, to 38,662.93, the S&P 500 .SPX lost 10.24 points, or 0.19%, to 5,350.55 and the Nasdaq Composite .IXIC added 31.54 points, or 0.18%, to 17,224.07.

    European shares extended the previous session's losses sparked by political uncertainties in France, as investors also turned their focus to the Federal Reserve.

    The pan-European STOXX 600 index .STOXX lost 0.76% and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.36%.

    Emerging market stocks lost 0.41%. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.68% lower, while Japan's Nikkei .N225 rose 0.25%.

    The dollar gained ground against a basket of world currencies as the euro dropped amid political turmoil brought about by far right gains in European elections and the snap election in France.

    The dollar index .DXY rose 0.23%, with the euro EUR= down 0.36% to $1.0724.

    The Japanese yen weakened 0.13% to 157.26 per dollar, while sterling GBP= was last trading at $1.2717, down 0.10% on the day.

    U.S. Treasury yields paused ahead of the CPI data and the Fed decision.

    Benchmark 10-year notes US10YT=RR last rose 7/32 in price to yield 4.4414%, from 4.469% late on Monday.

    The 30-year bond US30YT=RR last rose 12/32 in price to yield 4.5718%, from 4.595% late on Monday.

    Crude oil prices inched lower. U.S. crude CLcv1 fell 0.5% to $77.35 per barrel and Brent LCOcv1 was last at $81.54, down 0.11% on the day.

    Gold prices reversed an earlier drop and were last modestly higher.

    Spot gold XAU= added 0.3% to $2,316.59 an ounce.

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