S&P 500 dips with Fed policy announcement on tap

STORY: U.S. stocks tried to bounce back Tuesday but ended mostly lower with the S&P 500 digging deeper into a bear market.

Investors awaited a key decision from the Federal Reserve on deck for Wednesday and fretted over inflation, higher interest rates and the looming threat of recession.

The Dow ended half a percent lower. The S&P 500 finished down more than a third of percent. But the Nasdaq was able to eke a fractional gain.

Investors are now bracing for a more aggressive, 75-basis-point rate hike from the Fed after Friday's higher-than-expected inflation report for May.

And on Tuesday, data showed that another measure of inflation - the producer prices index - while slightly less than expectations on a year-over-year basis for May, was still high.

Michael Vogelzang, chief investment officer at CAPTRUST, says a 75-basis-point interest rate hike is all but certain.

"The Fed's going to come out tomorrow and they're likely to raise 75 basis points, 0.75%. That's almost baked in the cake. I think the odds in the market are about 90, 95%. So, you know, it was that adjustment from a 50 basis point increase to 75 that the market is digesting the last week, the last three or four days. So the question now is, what does he [Federal Reserve Chairman Jerome Powell] say tomorrow? Now, it's not so much on what he's going to do in terms of what the Federal Reserve's going to do, in terms of raising rates. Now it becomes a question of, what does he say along with it? How hawkish is he? How difficult is he going to be? How much can he talk the market down or interest rates higher based on his discussion around inflation?"

As for individual stocks, FedEx surged more than 14% after raising its quarterly dividend by more than half.

Shares of Oracle gained more than 10% after posting upbeat quarterly results on demand for its cloud-computing products.

But shares of AT&T fell, after the telecom giant's CFO hinted at raising prices for the second time this year to offset inflation.

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