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Stocks Fall Ahead of Fed; Technology Slides

Stocks fell Tuesday as the market was rattled by disappointing economic data out of China ahead of the Federal Reserve's statement on monetary policy.

The Dow Jones Industrial Average fell more than 80 points after eking out a modest gainon Monday.

Intel , Alcoa and Microsoft were among the Dow's biggest decliners. Merck and Procter & Gamble were among the few Dow stocks to advance.

Walmart shares slipped following news that the discount giant may be rolling back its rollbacks.

Hewlett-Packard shares bobbed in an out of positive territory after taking a beating in the past few sessions over CEO Mark Hurd's resignation late Friday, which occured after an investigation found he had falsified expense reports to conceal a relationship with a female contractor. Oracle CEO Larry Ellison blasted the company for forcing Hurd to resign.

ExxonMobil skidded following news that a deal with Qatar Petroleum for a $6 billion petrochemicals facility in Qatar.

The S&P 500and the Nasdaqalso dropped sharply Monday. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 23.

China's trade surplus unexpectedly soaredin July, a sign that the nation's economy is still struggling.

In the U.S., wholesale inventories rose 0.1 percentin July, while sales fell 0.7 percent; economists surveyed by Reuters had expected a more robust build in inventories and a sales increase.

The latest survey from the National Federation of Independent Business showed continued pessimism about the future and the Labor Department reported U.S. nonfarm productivity fellin the second quarter, a discouraging sign for the recovery.

The big event, of course, is the decision from the Fed, due out at 2:15 p.m. ET.

The Fed is widely expected to hold interest rates steady, but investors will be watching to see if the central bank announced plans to reinvest money in U.S. mortgage-backed securities and Treasurys.

Investors had been positioning for significant easing from the Fed, but market observers are expecting some disappointment out of the Fed meeting, leading stocks to drift lower, said Christopher Middleton, chief executive at Atlantic Equities.

The S&P 500 could come back in the short-term, Middleton said, but Christoph Riniker, head of strategy research at Julius Baer, said the markets are overbought.

"When you look at the current market, we're at the top of the trading range," Riniker said, adding the S&P has a resistance level at around 1,130 points.

Meanwhile, the San Francisco Fed said Monday in its economic letter that the probability that the US economy will slip back into recession over the next two years is higher than that of economic expansion.

Tech stocks were one of the biggest decliners amid a flurry of news out of the sector.

Tawian Semiconductor reported chip sales hit a fresh record but investors are worried that demand may have peaked.

Meanwhile, business-software maker Novell slashed its third-quarter revenue forecast.

But Netflix shares soared following news that the company has reached agreements to have films from Paramount Pictures, Lions Gate and MGM available to its customers just three months after they appear on pay television.

And U.S.-traded shares of Research In Motion rose after the Canadian company got a reprieve from a threatened ban on its BlackBerry services in Saudi Arabia.

Cisco is lower ahead of its earnings release after the bell on Wednesday, although it is expected to post increased sales.

Kohlberg Kravis Roberts , one of the world's biggest private equity companies, canceled plans for a $500 million public offering, without elaborating on the reason for its decision.

This Week:

TUESDAY: FOMC meeting, wholesale Trade data, Treasury 3-year note auction; Earnings after the bell the bell from Disney
WEDNESDAY: MBA purchase applications, international trade data, oil inventories; 10-year note auction; Earnings before the bell from Macy's and after the bell from Cisco
THURSDAY: Dell's annual meeting, jobless claims, import and export prices, 30-year bond auction; Earnings before the bell from Kohl's and after the bell from Nordstrom and Nvidia FRIDAY: CPI, retail sales, consumer sentiment, business inventories; Earnings before the bell from JC Penney

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