U.S. stocks closed mostly lower on Tuesday ahead of the Federal Open Market Committee's statement that could shed light on the timing of an interest rate hike.
Stocks came off session lows in the close, with only the Nasdaq in the black. The major indices held on to gains for the year.
"I don't know (about the slight recovery in equities) except it's widely recognized that the Fed is going to remain dovish tomorrow," said Bruce Bittles, chief investment strategist at RW Baird. "When you put all the economic reports together we've certainly had a slowdown in economic activity. I think the selling has quit mostly on the assumption the Fed will remain dovish in 2015."
Unlike most analysts, Bittles expects the Federal Reserve to raise its short-term interest rate early next year rather than this summer.
The FOMC's two-day meeting kicked off Tuesday, with its highly anticipated statement and press conference expected on Wednesday afternoon. Investors are looking at whether or not "patient" remains in the text as an indication of when short-term interest rates might go up.
"I don't think they will signal a rate hike in June," said Peter Cardillo, chief market economist at Rockwell Global Capital. "Whether or not they drop 'patient' is irrelevant. They'll probably replace it with another word that might indicate patience."
U.S. stocks jumped more than 1 percent on Monday, following three weeks of decline in the Dow and S&P 500, as investors positioned themselves ahead of the Fed meeting and options expirations.
"The closer you get to the Fed move the more volatility you have, especially if you throw the strong dollar into the mix," said Bill Stone, chief investment strategist at PNC Wealth Management. "We think this is a passing soft spot in the economy."
Out of previous 11 trading sessions the Dow has had 8 triple-digit closures, four up and four down.
The U.S. dollar continued to ease, falling about 1 percent, while the euro briefly edged above $1.06. The U.S. 10-year Treasury yield traded near 2.06 percent.
Crude oil settled down 42 cents at $43.46 a barrel, the lowest since March 2009. Brent held above $53 a barrel.
"I think we're still tied to the dollar," said Art Hogan, chief market strategist at Wunderlich Securities. "The correlation really hasn't broken down. The correlation is tighter with currency than with oil."