Updated from 4:21 p.m. EDT

Stocks in the U.S. ended marginally lower Tuesday as investors digested the latest round of earnings reports and positioned themselves ahead of the Federal Reserve's upcoming interest rate decision.

The Dow Jones Industrial Average lost 77.79 points, or 0.56%, to 13,792.47, pulled down by a 4% drop in component Procter & Gamble ( PG). The S&P 500 was off 9.96 points, or 0.65%, at 1531.02.

The Nasdaq Composite closed little changed, falling 0.73 point, or 0.03%, to 2816.71. The index was propped up by a 16.1% jump in Sepracor ( SEPR).

While traders were certainly thinking about the Fed and the latest quarterly numbers from corporate America, the news of the day came from Merrill Lynch ( MER), which said embattled CEO Stan O'Neal has decided to leave the firm, effective immediately.

Rumors of O'Neal's departure pushed the stock 10.7% higher over the previous two sessions, but shares of Merrill lost $1.86, or 2.8%, to $65.56 once the formal announcement came out.

Elsewhere, the Federal Open Market Committee began its two-day meeting, with a decision about rates due at 2:15 p.m. EDT on Wednesday. Most economists are expecting a 25-basis-point cut, the second reduction in as many months after the Fed kept its fed funds target rate at 5.25% for nine straight meetings dating back to June 2006.

"The market has been struggling, and the cyclical leadership stocks of late have been hit ahead of the Fed's rate meeting," said Phillip Roth, chief technical market analyst with Miller Tabak. "The question will be how the market responds to a Fed rate cut. We are expecting a 25-basis point cut and that's been discounted already. As soon as the Fed meeting comes and goes, traders will be waiting for the next data point."

Marc Pado, U.S. market strategist with Cantor Fitzgerald, said that the central bank had better not come up short or the market will panic.

"The rally over the last few days has been on less volume and less conviction, which we would take to imply that most of the funds completed their selling and are sitting pat, waiting for the Fed decision," he said. " A cut of 25 basis points is about 96% baked in the cake. Another 25 basis points is expected before the end of the year. Consolidation is the key for today."

Breadth was weak. On the New York Stock Exchange 3.11 billion shares changed hands, as decliners topped advancers by a 7-to-4 margin. Volume on the Nasdaq reached 2.12 billion shares, with losers outpacing winners nearly 3 to 2.

As for earnings, UBS ( UBS) said that third-quarter income fell 41% from a year ago, as the Swiss financial services firm had to deal with writedowns due to the subprime mortgage mess over the summer.

UBS also warned it may have to take further writedowns in the fourth quarter because of its ongoing exposure to the U.S. mortgage markets. Shares were off 14 cents, or 0.3%, to $53.11.

European bourses dipped following the UBS numbers. London's FTSE 100 lost 0.7%, the Paris CAC 40 was off 0.6%, and Germany's Xetra Dax was down 0.4%.

Back in the U.S., Procter & Gamble posted fiscal first-quarter results that topped the Thomson First Call average estimate by a penny. P&G fell, though, after saying it expects fiscal second-quarter earnings per share of 95 cents to 97 cents, compared with Wall Street's expectation of 97 cents.

Shares of the Dow component shed $2.88 to $68.95.

U.S. Steel ( X) said third-quarter earnings fell 35% from a year ago, resulting in an earnings miss. Qwest Communications' ( Q) quarterly results benefited from a $2.2 billion tax benefit, but the company cut its outlook for the full year.

U.S. Steel tumbled 7% to $104.62, and Qwest dropped 13.7% to end at $7.06.

Elsewhere, Colgate-Palmolive ( CL) posted a third-quarter profit that rose 22% from the year-ago period, exceeding the analyst target by a penny. Colgate shares closed higher by $1, or 1.4%, to $75.26.

Away from equities, crude prices retreated after setting new records on Monday. The December crude contract closed above $93 a barrel for the first time during the prior session, but dropped $3.15 to close at $90.38 this time.

On the economic front, the Conference Board said its consumer confidence index fell to a reading of 95.6 in October from 99.5 last month, worse than expectations for a reading of 99.0.

Treasury prices were little changed. The 10-year note was flat in price, yielding 4.39%. The 30-year bond shed 4/32 in price, yielding 4.67%. The dollar slid to new lows against the euro.