Nazz Leads Retreat

Merck (MRK Quote) profits fell to 62 cents from 80 cents last year, in line with expectations. The pharmaceutical giant has suffered a series of research failures of late. The stock climbed 15 cents, or 0.3%, to $47.35.

And Xerox(XRX Quote) said fourth-quarter earnings were 19 cents a share, excluding items, which beat Wall Street's consensus for 15 cents a share. Revenue rose about 1%. Shares of the company were up $1.21, or 8.7%, to $15.16.

In research, Credit Suisse First Boston downgraded shares of Nordstrom(JWN Quote) to neutral from outperform on the basis of valuation, and Smith Barney upgraded Micron(MU Quote) to buy from hold. Nordstrom lost 89 cents, or 2.2%, to $39.47, while shares of Micron were up 71 cents, or 4.7%, at $15.71.

Looking ahead, the fourth-quarter earnings train rolls on Wednesday, with reports from Procter & Gamble (PG Quote), Time Warner (TWX Quote) and JDS Uniphase (JDSU Quote), among others.

However, tomorrow's Fed policy announcement is likely to grab most of the headlines. The FOMC is expected to leave interest rates unchanged, but could offer clues on the future direction of monetary policy in its accompanying statement. Also in economic news, durable goods orders and new home sales for December will both be released.