US stocks fall as Fed meeting gets underway with inflation and Omicron in focus

• US stocks declined for a second straight session Tuesday but closed off session lows.
• The S&P 500 pulled back further from a record high as the Fed began its two-day policy meeting.

US stocks dropped Tuesday as investors prepared for what the Federal Reserve may say about monetary policy with inflation running hot and the global spread of the Omicron coronavirus strain picking up.

The Nasdaq Composite, home to the market's largest technology companies, slumped amid worries the Fed could signal that a faster pace of interest rate hikes is needed to tamp down on inflation. The S&P 500 fell further away from Friday's record-high finish, with the tech sector leading the slide.

Here's where US indexes stood at 4:00 p.m. on Tuesday:

• S&P 500: 4,634.09, down 0.75%
• Dow Jones Industrial Average: 35,544.18, down 0.30%
• Nasdaq Composite: 15,237.64, down 1.14%

The Fed started its two-day policy meeting Tuesday with government data showing producer price inflation hitting a record high of 9.6% in November from a year ago. That joined consumer price inflation last week shooting up to a 39-year high of 6.8%.

Central bank policymakers will conclude their meeting Wednesday and release a statement at 2 p.m. ET, followed by a briefing from Fed Chair Jerome Powell.

"The market is worried that the Fed will tighten [policy] too much, but also that inflation rises, or stays too high for too long. Nothing else is nearly as worrying," Kit Juckes, chief FX strategist at Societe Generale, wrote in a note Tuesday.

Meanwhile, worries about the Omicron variant returned to the fore. China reported its first case of the strain, and the UK's more than 59,000 daily coronavirus case rate marked the highest amount since January. UK lawmakers on Tuesday voted to require people to show COVID passes at nightclubs and other large venues.

Around the markets, dogecoin soared after Elon Musk said Tesla will let people purchase some of its merchandise with the meme cryptocurrency.

Oil prices dropped. West Texas Intermediate crude slumped 1.1% to $70.53 per barrel. Brent crude, the international benchmark, lost 0.3% at $73.46, narrowing losses.

Gold dropped by 0.9% to $1,773 per ounce. The 10-year yield climbed 3 basis points to 1.443%.

Bitcoin rose by 0.5%, at $47,120.